Dynare forums

dear professor Peifer,

I have a question about using data to estimate model: I remember I have seen a warning about using data somewhere , e.g. Y=C+I+G, If I have data of Y, C,I,G,can I use three of these four times series, because I did not remember exactly whether the warning says I can't use all these four series or three.

best
shuixing

You cannot use all four as this would give rise to stochastic singularity. Your model would imply an exact linear combination between the variables which does not hold in the data. To use all four, you would need to add measurement error.

jpfeifer wrote:You cannot use all four as this would give rise to stochastic singularity. Your model would imply an exact linear combination between the variables which does not hold in the data. To use all four, you would need to add measurement error.

ok thanks professor peifer~