I have a binary outcome (y1) with two endogenous variables (x1, x2) and I want to interact x1 with x3 (exogenous) and x2 with x4 (exogenous). I also have two instruments (z1, z2) and controls (c).
The reduced form regression results seem to provide meaningful coefficients. However, the coefficient of x2 in the second stage (after instrumenting) is so high (greater than 1, -1.49 to be precise). I run the following regression: ivregress 2sls y1 x3 x4 c (x1 x2 x1#x3 x2#x4 = z1 z2 z1#x3 z2#x4), r.
I have checked all the IV diagnostics and they seem fine. Any idea why this might be happening or is there a better way to handle this? Thank you.
The reduced form regression results seem to provide meaningful coefficients. However, the coefficient of x2 in the second stage (after instrumenting) is so high (greater than 1, -1.49 to be precise). I run the following regression: ivregress 2sls y1 x3 x4 c (x1 x2 x1#x3 x2#x4 = z1 z2 z1#x3 z2#x4), r.
I have checked all the IV diagnostics and they seem fine. Any idea why this might be happening or is there a better way to handle this? Thank you.
