Spurious Regressions and Near-Multicollinearity, with an Application to Aid, Policies and Growth
In multiple regressions, 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 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 "�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:||08 Nov 2012|
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- David Dollar & Craig Burnside, 2000.
"Aid, Policies, and Growth,"
American Economic Review,
American Economic Association, vol. 90(4), pages 847-868, September.
- 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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"Conditional aid effectiveness: A meta-study,"
Journal of International Development,
John Wiley & Sons, Ltd., vol. 22(4), pages 391-410.
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- Samuel Bazzi & Michael A. Clemens, 2013. "Blunt Instruments: Avoiding Common Pitfalls in Identifying the Causes of Economic Growth," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(2), pages 152-86, April.
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"Causality in Macroeconomics,"
Cambridge University Press, number 9780521002882, November.
- Chatelain, Jean-Bernard, 2010.
"Can statistics do without artefacts?,"
42867, University Library of Munich, Germany.
- Jean-Bernard Chatelain, 2010. "Can Statistics Do without Artefacts?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00750495, HAL.
- repec:hal:wpaper:hal-00750495 is not listed on IDEAS
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