[R] Running a GMM Estimation on dynamic Panel Model using plm-Package

[MicahD]

Hi bstudent,

I've had the same problem and I wish there was a definitive answer as this
seems to be the #1 problem with the package and pgmm would be awesome for
economists if we could figure out how to work it! I'm no expert on GMM, but
from what I've gathered from other posts, the problem may stem from your
panel data being a "long panel" with more time-varying observations than
cross-sectional (aka individual level) observations. If that happens then
there's a problem with the number of instruments used in the Arellano-Bond
estimator. I'm pretty sure you can determine exactly when it would be a
problem and what size your data set has to be, but you might have to learn
about the asymptotics of the Arellano-Bond estimator. Maybe someday someone
who knows more about GMM will tell us how to figure this one out. I love
this package, though, and panel data is at the pinnacle of dynamic empirical
analysis in economics, so I wish someone could come up with more detailed
instructions for non-experts. Panel GMM is becoming widely known as the most
efficient estimator of panel data regressions and I think I'd ask the plim
package to marry me if I ever found out how to work pgmm. Here's a link to a
good paper on "optimal instruments" by Arellano:

http://www.cemfi.es/~arellano/siv2004.pdf Instrumental Variables for Dynamic
Panel Models - Arellano (2004) 

- Micah

ps I simply reverted to Stata in order to get my Panel GMM estimations.

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