Hello,
In Stata list
(http://www.stata.com/statalist/archive/2006-06/msg00461.html) I found
the folling:
?Reverse causality in the first stage is irrelevant to consistency of
LIML (or 2SLS etc.).?
Does this mean the excluded instrument be correlated with the error in
the first regression as long as it is not correlated with the error in
the main equation (and is, of course, correlated with the endogenous
variable)?
I am doing an ivreg2 model and my excluded instrument does not reject
the null in the orthog() test but if, on a side, I do a Hausman test for
its exogeneity in the first regression, I reject the null.
Is the instrument valid anyway?
Any help would be most appreciated. Thank you.
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