Hello Statalists,

I had a question relating both to STATA's instrumental variable post-estimation commands as well as general economic theory - figured this place would be the best to ask.

I have used a lag of an arguably exogenous variable as my instrument but the exogeneity tests both come back significant suggesting this IV is endogenous.

Given that this is panel data and I'm using the xtivreg2 command, is the test significant because of the first-order correlation that comes with a lagged variable or is there just endogeneity that I haven't come to realise? Does first-order correlation still imply endogeneity?

Thank you for your input.

Rishi