# Instrumental Variables Probit

Please how can I analyze using instrumental Variables probit estimation, test for over identification and generate the marginal effects using Shazam

Debug mode is on, do not use it in production. To turn it off, use DEBUG = False in your settings.py file.

The following example may help you - adapted from Adkins(2009) as described below.

The example script can be downloaded here: IVProbit_Example.sha

The accompanying data is here: bank.shd

The SHAZAM Procedure can be downloaded here:IVProbit.prc

**EXAMPLE FILE**

```
* Example calling Instrumental Variables Probit Procedure
*
* Sample data is from Adkins(2009) to determine whether managerial incentives
* affect the use of foreign exchange derivatives by bank holding companies.
* Example replicates the results found in that paper.
*
* N.B. To reuse, set variables X,Y, X1 and Y1 to your own problem
*
* Read the data and create a constant by hand
read(bank.shd) / names
genr const = 1
* Set up matrices with all the variables of interest
* y = r.h.s. endogenous variables
* x = the complete set of instruments
* x1 = r.h.s. exogenous variables
* y1 = dichotomous l.h.s. variable
matrix y = eqrat|bonus|optval
matrix x = const|ltass|linsown|linstown|roe|mktbk|perfor|dealdum|div|dum97|dum98|dum99|dum00|no_emp|no_subs|no_off|ceo_age|gap|cfa
matrix x1 = const|ltass|linsown|linstown|roe|mktbk|perfor|dealdum|div|dum97|dum98|dum99|dum00
matrix y1 = d2
* Disable irrelevant output
set nooutput
set noecho
set nodoecho
* Call the Proc
exec IVProbit
* Print results
set output
print delt se
```

**SHAZAM PROCEDURE**

The procedure IVProbit is below:

```
* SHAZAM Procedure - Instrumental Variables Probit Estimator by AGLS
*
* Produces Amemiya's Generalised Least Squares Estimator (AGLS)
*
* This procedure produces a consistent estimator of the standard errors and can therefore
* easily be used for subsequent hypothesis testing of the parameters.
*
* References:
*
* Amemiya, T., 1978, The estimation of a simultaneous equation generalized probit model, Econometrica 46, 1193-1205.
* Amemiya, T., 1981, Qualitative response models: a survey, Journal of Economic Literature 19, 1483-1536.
* Newey, W.K., 1987, Efficient estimation oflimited dependent variable models with endogenous explanatory variables, Journal of Econometrics 36, 231-250
*
* Based on a program created and described by Lee C. Adkins in the paper
* Adkins, L., 2009, An Instrumental Variables Probit Estimator using gretl
* Steps defined below are described in that paper; Newey 1987 also a good reference
*
* Definitions of required input variables to be declared in calling routine.
* y = r.h.s. endogenous variables
* x = the complete set of instruments
* x1 = r.h.s. exogenous variables
* y1 = dichotomous l.h.s. variable
*
proc IVProbit
* Define equation matrices and useful parameters
matrix Z = X1|Y
gen1 nx=$rows
matrix b = INV(X'X)*X'Y
gen1 kx=$rows
gen1 ky=$cols
matrix d = INV(X'X)*X'Z
gen1 s = ky
gen1 kx1 = kx+1
gen1 kxy = kx+ky
* Step 1: Regress each y variable and store resid / pred
dim myres nx ky mypred nx ky
do #=1,ky
* Select the regressand vector from the matrix using its index
matrix ycol = y(0,#)
* Regress each y variable on x and store resid / pred
ols ycol x / resid=resid# pred=pred# noconstant
copy resid# myres / frow=1;nx trow=1;nx fcol=1;1 tcol=#;#
copy pred# mypred / frow=1;nx trow=1;nx fcol=1;1 tcol=#;#
endo
* Step 2 ...
```

Asked: ** 2013-05-14 10:53:47 +0000 **

Seen: **2,391 times**

Last updated: **Aug 19 '13**

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