Q: IV regression question
It is my first time working with IV regression and I need some help with understanding the results. The problem is the following: when I run the baseline regression in Stata:
xtivreg2 depvarlag (instrumented=instrument) i.year, fe robust first
the p-value of the F test of excluded instruments is not significant (first stage) , but once I include my control variables it becomes significant.
Does that mean that my instrument is not appropriate since the baseline regression has a not significant relationship between instrumental and instrumented variable?
Welcome to the Q&A forum, and thank you for your question. Based on the limited information we have about your data and study, we would recommend you to check the normality of your data. The data has to have normal distribution before performing regression analysis. Once you add your control variables and it shows significance, there may be an interaction effect between the first instrumental variable and the control variable on the instrumented variable.
You may also find some resources to help you with your data analysis here.
If you need further help with conducting the statistical analysis, you might find benefit in availing to a professional publication support services, for example, Editage’s Statistical Review Service.
Hope this helps. All the best for your study!