Hello!

I estimate the influence of some components of the global competitiveness index on the index itself for 12 countries over the period of 11 years. So, in my model I have N=12 and T=11, while the number of components is equal to 32. I am facing the situation when the only model, which provides acceptable test results for my data is the 1-step dynamic panel. In my model I use log differences of selected variable. Yes, it contains lagged dependent variables, but am worried if the presence of lagged dependent variables and the acceptable test results are enough to justify the selection of dynamic panel data model.