Is it possible to utilise the system GMM estimator using xtabond2 when our dependent variable lies within the interval [0, 1]. Moreover, the mass point is at around 0.
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GMM does not impose distrubutional assumptions on the errors, so you can estimate the model and the standard errors; interpreting the model for testing and inference might be tricky.
There is no such restriction on dependent variable to apply GMM. You can apply GMM even if dependent variable is binary.
For more detail you can refer: