The INSTRUMENTS statement is used in dynamic panel estimation (which you request via the DYNDIFF or DYNSYS option in the MODEL statement) to forgo the default set of instruments in favor of a custom set.
The INSTRUMENTS statement is also used to specify variables that are correlated with individual effects during Hausman-Taylor or Amemiya-MaCurdy estimation (which you request via the HTAYLOR or AMACURDY option, respectively, in the MODEL statement).
You can specify the following options:
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CONSTANT
includes an intercept (column of ones) as an instrument in dynamic panel estimation.
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CORRELATED=(variable variable … variable)
specifies a list of variables that are treated as correlated with the unobserved individual effects when you are fitting a Hausman-Taylor or Amemiya-MaCurdy model.
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DEPVAR<(DIFF | LEVEL | BOTH )>
-
specifies instruments that are related to the dependent variable. You can specify the following values:
- DIFF
creates instruments based on the dependent variable for the difference equations.
- LEVEL
creates instruments based on the dependent variable for the level equations.
- BOTH
creates instruments based on the dependent variable for the whole system.
The default is BOTH.
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DIFFEND=(variable variable … variable)
specifies a list of variables that are treated as endogenous when you are creating GMM-style instruments for the difference equations in dynamic panel estimation.
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DIFFEQ=(variable variable … variable)
specifies a list of variables that can be used as standard instruments for the difference equations in dynamic panel estimation.
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DIFFPRE=(variable variable … variable)
specifies a list of variables that are treated as predetermined when you are creating instruments for the difference equations in dynamic panel estimation.
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LEVELEND=(variable variable … variable)
specifies a list of variables that are treated as endogenous when you are creating instruments for the level equations in dynamic panel estimation.
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LEVELEQ=(variable variable … variable)
specifies a list of variables that can be used as standard instruments for the level equations in dynamic panel estimation.
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LEVELPRE=(variable variable … variable)
specifies a list of variables that are treated as predetermined when you are creating instruments for the level equations in dynamic panel estimation.
-
MAXBAND=integer
if specified, sets the maximum number of GMM-style instruments per observation, for each variable.
For a detailed discussion of the model setup and the use of the INSTRUMENTS statement for dynamic panel estimation, see the section Dynamic Panel Estimation (DYNDIFF and DYNSYS Options).
For Hausman-Taylor or Amemiya-MaCurdy estimation, you specify which variables are correlated with the individual effects by using the CORRELATED= option. All other options are ignored. For these estimators, the specified variables are not instruments; they are merely designated as correlated. The instruments are determined by the method; for more information, see the section Hausman-Taylor Estimation (HTAYLOR Option).
When you specify multiple INSTRUMENT statements, each is paired with the MODEL statement that immediately follows. For example, the following statements fit two dynamic panel models that have custom instrumentation:
proc panel data=test;
id cs ts;
instruments depvar diffeq = (x1);
model y = x1 x2 / dyndiff;
instruments depvar(level) diffeq = (x2);
model y = x2 / dynsys;
run;