estimation

[ivoryeview]

Hi, everyone.

I am doing GMM for a forward looking Talor rule model.

Here is the equation I input in the equation box

fed-(1-c(4))*(5.97-(c(2)-1)*c(1)+c(2)*inf+c(3)*gap)-c(4)*fed(-1)

Here is the IV list:
c gap(-1) gap (-2) gap (-3) gap(-4) fed(-1) fed(-2) fed(-3) fed(-4) spd(-1) spd(-2) spd(-3) spd(-4) cpi(-1) cpi(-2) cpi(-3) cpi(-4)

I keep facing the error message of nearly singular matrix

[EViews Gareth]

Estimation worked fine for me:

equation e1.gmm fed-(1-c(4))*(5.97-(c(2)-1)*c(1)+c(2)*inf+c(3)*gap)-c(4)*fed(-1) @ c gap(-1) gap (-2) gap (-3) gap(-4) fed(-1) fed(-2) fed(-3) fed(-4) spd(-1) spd(-2) spd(-3) spd(-4) cpi(-1) cpi(-2) cpi(-3) cpi(-4)

[ivoryeview]

Thank you for reading my question and working on my work file.
I tried again, it still does not work
I use QUICK-->equation
Select GMM
Input the equations and IV
Select HAC Quadratic Newey-West
Iteration 1000
It tells me that "nearly singular matrix"
Could you try the results for these three workfiles for me?


Thank you

[EViews Gareth]

It won't work in EViews 5.1

It should work in EViews 6.0, as long as that copy of EViews 6 is up to date.

[ivoryeview]

So it means that Eview 6.0 in the lab may not be updated such that GMM could be run?

But when I was taking the class I used to use Eview 6.0 in the lab to run another GMM estimation.

Is there any other way of solving this?

[EViews Gareth]

You could try removing one of your instruments.

[ivoryeview]

I tried manipulating with the IV many ways , up to reducing them to 4

But everytime it reports nearly singular matrix.

Thank you

[ivoryeview]

I keep clicking on the OK button......it works after dozens of clicks....
OMG

[EViews Gareth]

It is possible, since your equation is quite non-linear, that changing the starting values will alleviate the problem. Although GMM always uses 2SLS to obtain starting values, in non-linear cases EViews requires starting values for the 2SLS step.

Perhaps your starting values changed between your 11th click and your 12th.

[pabalo]

Firts of all, I apologise because I am new in this forum and I don't undestand exactly where to write. Anyway, I am sure that you are going to help me.

I am estimating a hybrid IS curve in GMM, using as instruments lags of the variables(dependent and independet). Well, the point is that if I use, for example, four lags of the variables (as instruments), I get some values for the coefficients, with the right signs for each variable. But, if I use, for example, six lags, I get again the right signs for the coefficients, but some of them change significantly. So, my questiong is how I can identify which set of instrument is the best for the estimation.

I know that I have to take into account the J-statistic provided by Eviews, but I don't know how I can compare the value of this test in the same spectification of the equation but with different set of instrument.

Thanks for your comment.