Spurious Regressions and Near-Multicollinearity, with an Application to Aid, Policies and Growth

Jean-Bernard Chatelain and Kirsten Ralf

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: Explanatory variables with simple correlation coefficients with the dependent variable below 0.1 in absolute value (such as aid with economic growth) may have very large and statistically significant estimated parameters in multiple regressions, which are unifortunately "outliers driven" or spurious. This is obtained by including another regressor which is highly correlated with the initial regressor, such as a lag, a square or interaction terms of this regressor. The analysis is applied on the "Botswana outliers driven" Burnside and Dollar [2000] article which found that aid had an effect on growth only for countries achieving "good" macroeconomic policies.

Keywords: growth; foreign aid; Near-Multicollinearity; student t-statistic; classical suppressor; parameter inflation factor; spurious regressions; Quasi-colinéarité; test de Student; régressions fallacieuse; Ceteris paribus; facteur d'inflation du paramètre; "suppresseur classique"; croissance; aide au développement (search for similar items in EconPapers)
Date: 2012-11
New Economics Papers: this item is included in nep-cwa and nep-fdg
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00802579v1
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Citations: View citations in EconPapers (11)

Published in 2012

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Related works:
Journal Article: Spurious regressions and near-multicollinearity, with an application to aid, policies and growth (2014)
Working Paper: Spurious regressions and near-multicollinearity, with an application to aid, policies and growth (2014)
Working Paper: Spurious regressions and near-multicollinearity, with an application to aid, policies and growth (2014)
Working Paper: Spurious Regressions and Near-Multicollinearity, with an Application to Aid, Policies and Growth (2012)
Working Paper: Spurious Regressions and Near-Multicollinearity, with an Application to Aid, Policies and Growth (2012)
Working Paper: Spurious Regressions and Near-Multicollinearity, with an Application to Aid, Policies and Growth (2012)
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