I am assessing the impact of economic sanctions on the five major components of GDP (imports, exports, consumption, expenditure, and investment) using a fixed effects model for panel data.

I've classified different sanctions levels into four dummy variables: threats, limited, moderate, and extensive.

I've included a number of others controls, such as L.Log(GDPpc), L.Log(Population), democracy, conflict, etc.

Issue:

I created a series of dummy to represent a country's openness to trade (Exports + Imports)/GDP. I then classified these into four levels of openness based on their quartile: low, medium, high, very high. This variable is lagged.

Question: When I am investigating the effect of economic sanctions on imports and exports, would it be inappropriate to include the lagged trade openness variable ((Exports + Imports)/GDP), since this is a component of imports and exports? Stata shows these variables to be statistically significant.

Thank you,

Ryan