This is my first experience for GMM. help me, please.
I should examine the relationship between X and Y across US states over the period 1993–2015 using the System GMM estimator. The lagged DVs, along with X1 and X2, are treated as endogenous and instrumented for with their lagged first differences. To eliminate the problem of instrument proliferation, which can invalidate results, I should collapse the instrument matrix and impose instrumental variable lag limits that satisfy the following conditions: (1) the null of the Hansen J test of over-identifying restrictions is not rejected and is not implausibly perfect (i.e., 0.05≤p(Hansen) < 1.00); and (2) there is no second-order autocorrelation in the model (i.e., p(AR2) > 0.05) (Roodman, 2009b). I should include the variables (X3, X4, X5 ) as pre-determined controls in all models, as well as fixed state and year effects. ( Fixed effect and first difference)
I wrote this code But I am not sure it could work. xtabond2 Y L.Y L2.Y L.X1 Lx2 X3 X4 X5, gmm( L.Y L2.Y X1 X2, lag(.,2), collapse), iv( x3 X4 X5) nolevel robust two
