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Hi,I've just started to participate in the forum. I'm having problems to deal with dummys in my model. I've contructed 3 dummy based on the litterature so I've got in my data two dummies called a_float and a_peg. who only takes the values 1 or 0 .The idea is that when both dommies are equal to zero we've got the third catégory a_adjust.I would like to introduce these two dummies in a VAR model but every time I try to do so the program writes the message "Near singular Matrix" . I don't know what to do!!! hope someone can help me plese!!!

Hi,

the "singular matrix" problem is that your 3 dummies are not independent. Dummy 1 + Dummy 2 + Dummy 3 = 1 as I understand it. This is perfectly the same as using a constant. So you must absolutely avoid to use one. Did you?