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My question is why N>T is required when working with dynamic panel estimations based on system GMM, such as xtdpdsys at stata. Is that based on the potential lost of information due to orthogonal deviations?

Thanks

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  • $\begingroup$ Perhaps some parameters are allowed to vary by time period. $\endgroup$ Jan 27 at 16:35
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Asymptotics are done as N goes to infinity and not T. If T is larger than N, this assumption is odd. True for most of what is commonly called panel data estimators.

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  • $\begingroup$ Your point is good (+1), but I am not sure that this is the true reason (why several software do not compute it numerically). I have the feeling that it is related to the rank of the weighting matrix $W$. $\endgroup$
    – Bertrand
    Jan 29 at 12:45
  • $\begingroup$ This looks related but I'm not sure if its helpful. papers.ssrn.com/sol3/papers.cfm?abstract_id=1412035 $\endgroup$
    – mark leeds
    Jan 30 at 17:25

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