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Hi everybody,

I have a really simple system of equation in which I determine the term spread in the US and Germany.

D(GER10Y-EUR3M) = C(1) * D(GER10Y(-1)-EUR3M(-1)) + C(2) * D(USA10Y-USA3M) + C(3) * D(LOG(EXCH)) + C(6) * D(VIXEU)
D(USA10Y-USA3M) = C(11) * D(USA10Y(-1)-USA3M(-1)) + C(12) * D(GER10Y-EUR3M) + C(13) * D(LOG(EXCH)) + C(16) * D(VIX)

I tried to instrument those variables with the Central Bank rates, but I get an error saying "Near singular matrix". The problem is that, WHICHEVER variable I use, I ALWAYS get the same error.
Am I doing something wrong? Am I choosing the wrong instruments? (In that case do you have any suggestion?).

Maybe it's just a bug (I am still using Eviews 5)

Thanks!

Quick question. Do you get singularity if you estimate using OLS?

Quick question. Do you get singularity if you estimate using OLS?

No

Sorry for the delay, I didn't see your response.

Hard to say.

Can you post the workfile? With a complete description of the instrument specification you used (ideally, with the system object saved in the workfile).