Working Paper #2009-020
Collinearity in growth regressions: The example of worker remittances
The sign of worker remittances in growth regressions is heavily disputed
in the literature. Comparing two growth regressions with different signs
for the remittance variable we show that collinearity with the lagged
dependent variable might indicate that collinearity should be
investigated comprehensively and might lead to a change in
specifications which differ in the variance inflation factors (VIF). In
our case the variance inflation factor for remittances depends on the
use of a five or one-year lag of the lagged dependent. In the regression
with a VIF below ten, the standard critical value, the sign of
remittances is positive.
- Keywords
-
- Growth
- remittances. JEL-code: F24
- O11
- 15
- 40. UNU-MERIT Working Papers ISSN 1871-9872
Cite this as
APA 7th ed.Ziesemer, T. (2009). Collinearity in growth regressions: The example of worker remittances (UNU-MERIT Working Paper No. 2009-020). UNU-MERIT. https://unu-merit.nl/publications/working-papers/abstract/?id=3721