Is GMM panel data a better method than Anderson and hsiao estimator of dynamic panel data

[Vaishnavi Balaji]

Respected Sir/Mam,

                                     I wanted to know what are the various types of dynamic panel data regression methods. Which dynamic panel data method is best. Is GMM panel data a better method  than Anderson and hsiao estimator of dynamic panel data. Please explain. Thank you. I wanted to know whether GMM method is the best estimate for dynamic panel data.

[Miklesh Yadav]

Dear Vaishnavi,

  You may get the following three types of dynamic panel regression in literature:  

1. Anderson and Hsiao (1982) 

2. Difference GMM (Arellano and Bond Estimator)

3. System GMM (Arellano and Bover)

Since Anderson and Hsiao (1982) proposed that either the first difference or level of the second lag of the dependent variable should be used as an instrumental variable due to which this method may be consistent but not efficient because IV doesn’t exploit all the available moments conditions (Arellano and Bond, 1991).

On this note, we employ a difference GMM and System GMM but which is the best model out of these two models (difference and system GMM) is decided by the requirement of your data. The same, I have already discussed in your trailing mail.

iK6mBQ6zm2Nx77u1AAXmMz7eC6pGrM_uMTSPEx6iAqMfA%40mail.gmail.com.

[Vaishnavi Balaji]

Respected Miklesh Sir,

                                        Thanks a lot for your information Sir.

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