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Les liaisons fallacieuses : quasi-colinéarité et « suppresseur classique », aide au développement et croissance

This paper shows that a multiple regression with two highly correlated explanatory variables, both of them with a near zero correlation with the dependent variable may correspond to a spurious regression or to a homeostatic model, with estimates highly sensible to outliers. The regression method does not allow how to decide which one of the two models is relevant. Statistical significance of the (very high) parameters is easily obtained, as shown doing Monte Carlo simulations. An example is provided by the Burnside and Dollar [2000] article on aid, policies and growth.

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File URL: ftp://mse.univ-paris1.fr/pub/mse/CES2012/12011.pdf
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Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 12011.

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Length: 10 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:mse:cesdoc:12011
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  1. Chatelain, Jean-Bernard & Ralf, Kirsten, 2014. "Spurious regressions and near-multicollinearity, with an application to aid, policies and growth," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 85-96.
  2. Hristos Doucouliagos & Martin Paldam, 2010. "Conditional aid effectiveness: A meta-study," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(4), pages 391-410.
  3. repec:cup:cbooks:9780521002882 is not listed on IDEAS
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