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    Economics - Instrumental Variable: Does including past values of regressors into the IV cause exogeneity assumption to fail?

    Setup: Annual panel of 125 countries. I am interested in the effect of x on y. As an instrument z I use an interaction of the variables gamma and delta. gamma fulfils the conditions of relevance and exogeneity. delta is the country’s propensity to receive x, which is an indicator variable based...