Professional Documents
Culture Documents
Dynamicslidesecon507 PDF
Dynamicslidesecon507 PDF
Dynamicslidesecon507 PDF
Walter Sosa-Escudero
Econ 507. Econometric Analysis. Spring 2012
Walter Sosa-Escudero
Y = X + u,
Premultiply by Z 0
Z 0Y
= Z 0 X + Z 0 u
Y = X + u
It is easy to see that E(u |X ) = 0, and that
V (u |X ) = E(u u0 ) = E(Z 0 uu0 Z) = 2 (Z 0 Z) ,
non-spherical.
Walter Sosa-Escudero
Walter Sosa-Escudero
Generalization: V (u|X) =
Walter Sosa-Escudero
Walter Sosa-Escudero
Walter Sosa-Escudero
yit
= yi,t1
+ xit + uit
yi,t1
1 X
yi,t1 ,
= yi,t1
T 1
t=2
uit
T
1X
= vit
vit
T
t=1
Walter Sosa-Escudero
Cov(yi,t1
, uit )
v2 (T 1) T + T
T2
(1 )2
Walter Sosa-Escudero
Walter Sosa-Escudero
E[vit yi,tj ] = 0,
j = 2, . . . , T 1; t = 3, 4, . . . , T
Walter Sosa-Escudero
i
1
1
1
1
1
2
2
2
2
2
t
1
2
3
4
5
1
2
3
4
5
yit
a
b
c
d
e
f
g
h
i
j
yi,t1
Dy
Dyi,t1
AH
yi,t2
AB
1
a
b
c
d
c-b
d-c
e-d
c-b
d-c
a
b
c
a
0
0
0
a
0
0
b
0
0
0
a
0
0
b
0
0
c
f
g
h
i
h-g
i-h
j-i
h-g
i-h
f
g
h
f
0
0
0
f
0
0
g
0
0
0
f
0
0
g
0
0
h
Walter Sosa-Escudero
[yi1 ]
0
[y
,
y
]
i1
i2
Wi =
..
.
0
[yi1 , . . . , yi,T 2 ]
i = 1, . . . , N
PN
Walter Sosa-Escudero
i v
i0 Wi
Wi0 v
Walter Sosa-Escudero
Arellano and Bond (91): use the GIV estimator. Premultiply to get
W 0 y = W 0 y1 + W 0 v
and replacing in the formula for the GIV estimator V IG :
0
0
1 = (y1
W (W 0 W )1 W 0 y1 )1 y1
W (W 0 W )1 W 0 y
Walter Sosa-Escudero
Walter Sosa-Escudero
Empirical Illustration
Walter Sosa-Escudero