ivreghdfe weak instrument

[adityapolisetty]

Hi Sergio

I am using ivreghdfe in the context of trade models because the function can deal with numerous country fixed effects and I have an endogenous regressor. However, when I use this function I am getting a very low f statistic in the first stage (which isn't happening when I use a simple ivreg2 with a small option).

I don't understand how the absorbing of FEs is affecting my first state f value. I am completely new to this. I would like to understand why this is happening. Also, for my application when should I use clustering?

Thank you