Spurious Regressions and Near-Multicollinearity, with an Application to Aid, Policies and Growth
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  article which found that aid had an effect on growth only for countries achieving "good" macroeconomic policies.
|Date of creation:||Nov 2012|
|Date of revision:|
|Publication status:||Published in Documents de travail du Centre d'Economie de la Sorbonne 2012.78 - ISSN : 1955-611X. 2012|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00802579|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Hristos Doucouliagos & Martin Paldam, 2005. "Aid Effectiveness on Growth. A Meta Study," Economics Working Papers 2005-13, Department of Economics and Business Economics, Aarhus University.
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