I have the potentially endogenous variables Loan size and the loan rate. Loan rate is my dependent variable and loan size is an Independent variable. I implemented an interaction of loan size with my test variables to see if my test variables are affected by loan size. Can this Count as an indirect check for endogeneity? As I could not find suitbale Instruments to conduct an instrumental variable Approach and dropping loan size turned my test variables insignificant, I want to check if endogeneity is a substantial problem in my model.
input float Loanspread_pct int Age long Totalassets byte Numberofemployees float Corporationdummy long Grossprofit float(Profitability_pct Leverage_pct) long Loansize byte Maturity double(GDPGrowth Duration) byte Housebank str6 Loantype float Banks
5.45 8 1500 28 1 1600 6.25 95 475 10 .015 0 0 "Credit" 7
1.25 8 1500 28 1 1600 6.25 95 475 10 .015 0 0 "Credit" 1
2.52 6 500 15 1 800 8.75 50 150 10 .015 5.75 1 "Credit" 8
9.14 6 500 15 1 800 8.75 50 30 1 .015 5.75 1 "LC" 8
9.07 6 500 15 1 800 8.75 50 20 1 .015 6 1 "LC" 8
8.72 23 387 10 0 815 3.435583 72 80 1 .022 10 1 "LC" 8
8.67 24 415 10 0 830 5.060241 77 80 1 .022 11 1 "LC" 8
8.55 25 400 10 0 850 3.529412 90 120 1 .015 12 1 "LC" 8
5.02 24 415 10 0 830 5.060241 77 60 6 .022 1 0 "Credit" 7
9.42 15 800 25 1 3500 3.4285715 20 100 1 .015 4.666666666666667 0 "LC" 3
4.07 15 800 25 1 3500 3.4285715 20 620 20 .015 0 0 "Credit" 6
9.31 15 800 25 1 3500 3.4285715 20 230 3 .015 5 0 "LC" 5
1.76 7 130 8 0 300 23.333334 40 50 10 .015 4.75 1 "Credit" 1
.71 1 60 3 0 190 0 0 20 10 .005 0 1 "Credit" 1
9.16 7 130 8 0 300 23.333334 40 15 3 .022 3 0 "LC" 3
3.26 20 450 12 1 800 8.125 26 50 10 .015 10.083333333333334 0 "Credit" 8
4.33 18 462 12 1 830 8.192771 32 125 5 .022 8 0 "Credit" 8
5.17 19 438 12 1 755 7.549669 30 100 5 .022 0 0 "Credit" 4
8.15 20 450 12 1 800 8.125 26 15 1 .015 10 0 "LC" 8
8.26 19 438 12 1 755 7.549669 30 15 1 .022 9 0 "LC" 8
8 18 462 12 1 830 8.192771 32 15 1 .022 8 0 "LC" 8
8.84 19 438 12 1 755 7.549669 30 120 1 .022 10 0 "LC" 5
8.97 18 462 12 1 830 8.192771 32 120 1 .022 9 0 "LC" 5
8.67 20 450 12 1 800 8.125 26 10 1 .015 10.583333333333334 0 "LC" 5
3.9 15 320 10 1 1000 8 55 70 6 .015 7 0 "Credit" 5
4.09 15 320 10 1 1000 8 55 100 5 .015 5.166666666666667 0 "Credit" 4
3.33 10 277 12 1 800 9.375 60 150 4 .015 5.083333333333333 1 "Credit" 5
2.79 18 720 25 1 1800 11.38889 45 350 3 .022 12 1 "Credit" 5
2.45 20 695 25 1 2000 10.5 45 300 6 .015 14 1 "Credit" 5
4.55 3 248 3 1 500 11 44 30 4 .017 0 0 "Credit" 3
4.91 4 250 3 1 600 8.333333 50 50 5 .022 1.33 0 "Credit" 4
10.05 3 248 3 1 500 11 44 8 1 .017 0 0 "LC" 7
10.02 4 250 3 1 600 8.333333 50 8 1 .022 1 0 "LC" 7
10.03 4 250 3 1 600 8.333333 50 10 3 .022 1.083 0 "LC" 9
9.84 2 462 25 1 1750 2.2857144 45 100 1 .022 0 0 "LC" 9
9.43 3 450 29 1 1900 2.710526 50 200 3 .022 .5833333333333334 0 "LC" 9
9.62 3 450 29 1 1900 2.710526 50 100 1 .022 1 0 "LC" 9
5.26 2 462 25 1 1750 2.2857144 45 250 5 .022 0 0 "Credit" 4
5.12 4 440 29 1 2000 2.5 50 200 5 .015 1.4166666666666667 0 "Credit" 4
8.16 7 360 9 1 415 18.795181 25 15 1 .017 5 1 "LC" 7
8.11 8 350 9 1 435 18.62069 25 25 1 .022 6 1 "LC" 7
8.04 9 345 9 1 430 18.60465 30 15 1 .022 7 1 "LC" 7
2.58 45 1000 14 0 1450 7.931035 60 350 7 .005 15 1 "Credit" 7
2.27 50 1050 15 0 1500 6.666667 70 300 10 .015 20 1 "Credit" 7
8.23 45 1000 14 0 1450 7.931035 60 150 1 .005 15 1 "LC" 7
8.07 46 970 15 0 1400 6.785714 70 150 1 .022 16.5 1 "LC" 7
8.05 47 960 15 0 1475 6.779661 70 150 1 .017 17.75 1 "LC" 7
8.78 7 350 3 0 400 12.5 50 20 1 .015 7 1 "LC" 6
3.39 7 350 3 0 400 12.5 50 15 5 .015 7 1 "Credit" 6
2.9 25 500 25 1 1100 18.181818 80 150 10 .015 15 1 "Credit" 5
2.6 25 500 25 1 1100 18.181818 80 400 15 .015 15 1 "Credit" 5
8.52 25 500 25 1 1100 18.181818 80 50 1 .015 15 1 "LC" 5
2.1 40 620 25 0 2000 15 20 150 10 .015 20 1 "Credit" 5
8.12 40 620 25 0 2000 15 20 50 1 .015 20 1 "LC" 5
2.57 35 380 12 1 1500 6.666667 30 25 5 .015 15 1 "Credit" 5
3.12 4 400 7 0 950 13.68421 25 300 5 .017 3 1 "Credit" 7
2.54 7 425 9 0 1000 12.3 20 250 7 .015 6 1 "Credit" 7
8.76 4 400 7 0 950 13.68421 25 50 1 .017 3 1 "LC" 7
8.82 5 415 8 0 975 14.358974 20 80 1 .022 4.333333333333333 1 "LC" 7
8.87 6 410 9 0 935 13.368984 20 80 1 .022 5.333333333333333 1 "LC" 7
8.66 7 425 9 0 1000 12.3 20 80 1 .015 6 1 "LC" 7
2.85 102 370 6 0 427 14.285714 42 80 5 .022 23 1 "Credit" 5
9.24 102 370 6 0 427 14.285714 42 30 1 .022 8 0 "LC" 6
9.17 103 375 6 0 430 13.953488 45 45 1 .022 8.75 0 "LC" 6
1.6 102 370 6 0 427 14.285714 42 80 5 .022 0 0 "Credit" 2
1.91 17 3500 28 1 2875 5.495652 38 500 10 .005 14 1 "Credit" 5
3.76 22 3625 30 1 3000 5 40 400 7 .022 4 0 "Credit" 3
9.36 22 3625 30 1 3000 5 40 60 2 .022 5 0 "LC" 4
9.68 22 3625 30 1 3000 5 40 50 2 .022 .16666666666666666 0 "LC" 4
4.61 18 3100 15 1 2600 6.538462 50 150 3 .018 5 0 "Credit" 3
4.65 18 3100 15 1 2600 6.538462 50 130 4 .018 4 0 "Credit" 4
9.4 18 3100 15 1 2600 6.538462 50 50 2 .018 4 0 "LC" 4
2.09 26 2650 35 1 2300 9 21 300 5 .022 22 1 "Credit" 7
2.15 27 2710 35 1 2425 9.278351 28 250 7 .017 23 1 "Credit" 7
1.98 29 2665 33 1 2400 8.75 25 50 9 .022 25.25 1 "Credit" 7
1.75 30 2700 33 1 2350 8.297873 25 80 10 .015 26.333333333333332 1 "Credit" 7
7.8 27 2710 34 1 2425 9.278351 28 80 1 .017 23.166666666666668 1 "LC" 7
2.74 17 1980 26 1 1650 8.939394 26 325 10 .022 16 1 "Credit" 7
2.7 19 2050 26 1 1700 8.941176 31 150 8 .022 18.333333333333332 1 "Credit" 7
2.55 20 1930 26 1 1750 8.857142 33 220 5 .015 19.166666666666668 1 "Credit" 7
8.15 19 2050 26 1 1700 8.941176 31 80 1 .022 18.166666666666668 1 "LC" 7
end
[/CODE]
Code:
xtset Banks
Code:
xtreg Loanspread_pct Age Totalassets Numberofemployees Corporationdummy Grossprofit Profitability_pct Leverage_pct Loansize Maturity GDPGrowth_pct Duration Housebank c.Loansize#c.Duration c.Loansize#i.Housebank if Loantype=="LC", fe vce (cluster Banks)

Robust
Loanspread~t Coef. Std. Err. t P>t [95% Conf. Interval]

Age .0070297 .0067637 1.04 0.339 -.0095205 .0235798
Totalassets .0008028 .0000978 8.21 0.000 .0005636 .001042
Numberofem~s -.0151647 .0204591 -0.74 0.487 -.0652264 .034897
Corporatio~y -.4132243 .2830996 -1.46 0.195 -1.105944 .2794954
Grossprofit .0001536 .0002272 0.68 0.524 -.0004024 .0007096
Profitabil~t -.0353282 .0320068 -1.10 0.312 -.113646 .0429896
Leverage_pct .0144695 .0036746 3.94 0.008 .005478 .0234609
Loansize -.0046372 .0026792 -1.73 0.134 -.011193 .0019186
Maturity .00222 .1535463 0.01 0.989 -.3734942 .3779341
GDPGrowth_~t -.0282088 .1915538 -0.15 0.888 -.496924 .4405065
Duration -.141632 .0406531 -3.48 0.013 -.2411066 -.0421574
Housebank .0503532 .5911262 0.09 0.935 -1.396081 1.496787

c.Loansize#
c.Duration .0000725 .0004771 0.15 0.884 -.0010949 .00124

Housebank#
c.Loansize
1 -.0034348 .0105666 -0.33 0.756 -.0292903 .0224207

_cons 9.61221 .5827605 16.49 0.000 8.186247 11.03817

sigma_u 1.0533132
sigma_e .28206771
rho .93308652 (fraction of variance due to u_i)

Also in respect of the Interpretation of the interaction coefficient, does the positive coefficient of Duration#Loansize mean that the effect of Duration on Loanspread_pct is stronger by
.0000725 percentage points
when loansize increases by 1000€?