Dear Researchers,
I’m working on a panel N= 13 and T = 54.
I ran fixed and random effects models. In addition, I wanted to run GMM model as a kind of robustness check and to control for potential endogetinty issues, knowing that GMM is preferable with small T and large N.
The problem is : the Arellano – Bond test for autocorrelation AR(1) is non-significant.
I know that the test for AR (1) process in first differences usually rejects the null hypothesis since
Δeit=eit−ei,t−1 and Δei,t−1=ei,t−1−ei,t−2 and both have ei,t−1
What could be the justification behind the failure to reject H0? Does this give any evidence to a Random Walk process? I will appreciate if you can guide me to any interpretation..
Thank you so much.
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