Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96630
Authors: 
Chatelain, Jean-Bernard
Ralf, Kirsten
Year of Publication: 
2014
Citation: 
[Journal:] Journal of macroeconomics [ISSN:] 0164-0704 [Volume:] 39 [Issue:] A [Pages:] 85-96
Abstract: 
In multiple regressions, explanatory variables with simple correlation coefficients with the dependent variable below 0.1 in absolute value (such as aid/gross domestic product (GDP) with GDP growth) face a problem of parameter identification. They may have very large, statistically significant, estimated parameters which are unfortunately "outliers driven" and 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 "Gambia and Botswana outliers driven" Burnside and Dollar [2000] article which found that aid/GDP had an effect on growth only for countries achieving "good" macroeconomic policies.
Subjects: 
spurious regression
identification
hypothesis testing
near-multicollinearity
conditional independence
foreign aid
economic growth
JEL: 
C12
O19
P45
Persistent Identifier of the first edition: 
Document Type: 
Article

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