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Hi,

I am trying to estimate the MIDAS models of clements and galvao (2008) in order to estimate GDP growth using the leading indicators.
The leading indicator I am using to estimate gdp growth is new building permits and the equation i am trying to estimate is equation 3 in the attached page; with m=3, K=5 and h=1.
My code to estimate this in eviews is:

ls gdpg c(3) c(5)*gdpg(-1) c(4)*((1/(exp(c(1)+c(2))+exp((2*c(1))+(4*c(2)))+exp((3*c(1))+(9*c(2)))+exp((4*c(1))+(16*c(2)))+exp((5*c(1))+(25*c(2)))))*exp(c(1)+c(2))*(permitg(-1)-c(5)*permitg(-2))+(1/(exp(c(1)+c(2))+exp((2*c(1))+(4*c(2)))+exp((3*c(1))+(9*c(2)))+exp((4*c(1))+(16*c(2)))+exp((5*c(1))+(25*c(2)))))*exp((2*c(1))+(4*c(2)))*(permitg1(-1)-c(5)*permitg1(-2))+(1/(exp(c(1)+c(2))+exp((2*c(1))+(4*c(2)))+exp((3*c(1))+(9*c(2)))+exp((4*c(1))+(16*c(2)))+exp((5*c(1))+(25*c(2)))))*exp((3*c(1))+(9*c(2)))*(permitg2(-1)-c(5)*permitg2(-2))+(1/(exp(c(1)+c(2))+exp((2*c(1))+(4*c(2)))+exp((3*c(1))+(9*c(2)))+exp((4*c(1))+(16*c(2)))+exp((5*c(1))+(25*c(2)))))*exp((4*c(1))+(16*c(2)))*(permitg(-2)-c(5)*permitg(-3))+(1/(exp(c(1)+c(2))+exp((2*c(1))+(4*c(2)))+exp((3*c(1))+(9*c(2)))+exp((4*c(1))+(16*c(2)))+exp((5*c(1))+(25*c(2)))))*exp((5*c(1))+(25*c(2)))*(permitg1(-2)-c(5)*permitg1(-3)))

where gdpg is measured, permitg, permitg1 and permitg2 are measured quarterly. permitg1 is the the month prior to permitg and permitg2 is 2 months prior to permitg.

My problem is that when I try to run this regression i am greeted by the "Near singular matrix" error message.

Any help on this would be much appreciated.

Thanks

You've probably got perfectly collinear regressors. Obviously it is pretty difficult to diagnose what is causing the collinearity with such a large set of regressors.

It is also possible that multicollinearity is a consequence of the coefficient starting values.

that's a good point too.