Message of REG10

[T_FIELD]

Dear Colleagues,

What does Rats output when I got the message "First * Instruments Are Linearly Dependent Over Regression Range"?
Output by OLS ignoring instruments? Or, output by IV in spite that Rats gives me the message?
In addition, how Rats check whether variables are linearly dependent?

Any suggestions are welcome.

Best,

[TomDoan]

Part of doing IV requires inverting the cross product of the instruments. It's detecting that that's singular. If you have enough instruments that you can give up the redundant instruments and still be identified, then it works as if you dropped the unnecessary instruments. If you don't have enough distinct instruments, then you will get a singular regression.