I'm currently working with a panel data set that has 6 cross-sections and 19 time periods. In the process, I've encountered issues related to endogeneity, as well as challenges with both stationary and non-stationary data. To address these, I decided to run a panel ARDL, but unfortunately, I faced a near-singular matrix issue. This led me to remove a few variables that I initially wanted to test.
I'm reaching out to seek your advice. Are there alternative methods or approaches I could consider for a data set of this nature? Your insights would be highly appreciated.
Hi Kalani,
It is a very common problem when you run panel ARDL in relatively small sizes. Please check for possible multicollinearity issues in your model. Otherwise, try to reduce the number of max lags (both in the dependent variable and regressors)
Best,
Apostolos
Apostolos Vetsikas Thank you for your response. I used one lag and discovered a multicollinearity issue. Unfortunately, the variable that showed multicollinearity is one of the variables I need for my research. When I exclude it, I can run the panel ARDL model, but I am looking for a way to include it while still being able to run the model. Is there a way for that?
I'm afraid of not (to the best of my knowledge). You have only 114 observations for applying this method...
Take a look at the following discussion
https://www.researchgate.net/post/I-am-doing-a-panel-data-regression-analysis-and-I-am-having-this-warning-near-singular-matrix-what-does-this-mean-and-how-do-i-solve-this-error
Also, if you use EViews, please try alternatively the Stata software
https://www.reddit.com/r/econometrics/comments/ckrftc/ardl_model_error_message_singular_matrix/
https://forums.eviews.com/viewtopic.php?t=20691
Apostolos Vetsikas Thank you so much.Ill have a look.I highly apprecaite your response.
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