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Not independent observations!!!

PostPosted: Wed Aug 10, 2016 6:23 am
by Alkebulan
I am trying to estimate a model and I have there observations but 2 of them are obtained from the third, would that be a problem? I have data on output, but I only have data on tax revenues as a % of gdp and informal sector as a % of gdp, so I multiply gdp by these %s to get series for Tax Revenues and Informal output.
I ask because I get the following warnings:
1- "Warning: Matrix is singular, close to singular or badly scaled.
Results may be inaccurate. RCOND = NaN."

2- "Warning: Matrix is singular to working precision."

And the code does not produce the smoothed shocks. Any help would appreciated.

Re: Not independent observations!!!

PostPosted: Wed Aug 10, 2016 7:49 am
by jpfeifer
As long as your observation equations are correctly specified, that is not a problem, because these variables still contain information separate from GDP.
The error messages you describe are most likely due to something else.