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Title: ADDRESSING MULTICOLLINEARITY ISSUES AND MACROECONOMIC VARIABLES IN NIGERIA: CORRELATION COEFFICIENTS AND VARIANCE INFLATION FACTORS (VIF) ANALYSIS
Authors: Ubangida, Shuaibu Ph.D . and Abdullahi, Hadiza
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Ubangida, Shuaibu Ph.D 1 . and Abdullahi, Hadiza2 1. Senior Lecturer, Department of Economics, School of Secondary Education, Arts and Social Sciences, Federal College of Education, Zaria 2. Principal Lecturer, Department of Economics, School of Secondary Education, Arts and Social Sciences, Federal College of Education, Zaria
MLA 8 Shuaibu, Ubangida, and Abdullahi Hadiza. "ADDRESSING MULTICOLLINEARITY ISSUES AND MACROECONOMIC VARIABLES IN NIGERIA: CORRELATION COEFFICIENTS AND VARIANCE INFLATION FACTORS (VIF) ANALYSIS." Int. j. of Social Science and Economic Research, vol. 8, no. 6, June 2023, pp. 1394-1407, doi.org/10.46609/IJSSER.2023.v08i06.016. Accessed June 2023. APA 6 Shuaibu, U., & Hadiza, A. (2023, June). ADDRESSING MULTICOLLINEARITY ISSUES AND MACROECONOMIC VARIABLES IN NIGERIA: CORRELATION COEFFICIENTS AND VARIANCE INFLATION FACTORS (VIF) ANALYSIS. Int. j. of Social Science and Economic Research, 8(6), 1394-1407. Retrieved from https://doi.org/10.46609/IJSSER.2023.v08i06.016 Chicago Shuaibu, Ubangida, and Abdullahi Hadiza. "ADDRESSING MULTICOLLINEARITY ISSUES AND MACROECONOMIC VARIABLES IN NIGERIA: CORRELATION COEFFICIENTS AND VARIANCE INFLATION FACTORS (VIF) ANALYSIS." Int. j. of Social Science and Economic Research 8, no. 6 (June 2023), 1394-1407. Accessed June, 2023. https://doi.org/10.46609/IJSSER.2023.v08i06.016.
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ABSTRACT: The aim of this paper is to assess and address multicollinearity problems in some selected macroeconomic variables which affect Economic Growth in Nigeria, using Correlation Coefficients and Variance Inflation Factors (VIFs) as one of the methods used for detecting the multicollinearity problem. The study employed different model specifications to solve the problem and compared the results with the results obtained from the Ordinary Least Square (OLS) results in the general model in order to produce the best possible model to address the problem of the study. The Macroeconomic Variables used as explanatory variables are Unemployment (URt), Inflation (IRt), Foreign Direct Investment (FDRt) and Size of Labour Force(SLFt) while Real GDPt stands as the dependent variable. After applying the remedy, the results show that in Nigeria unemployment seems to be correlated with and Size of Labour force (SLFt). FDIt has a positive significant effect on GDP while unemployment (URt) has a negative and significant impact on economic growth. Size of Labour force (SLFt) and inflation (IRt) have no any significant impact on economic growth. The paper concludes that the use Correlation Coefficients and High Variance Inflation Factors (VIFs) are efficient ways of detecting multicollinearity. The paper recommends the removal of the correlated variables and fitting them in separate models to reduce the multicollinearity problem so as to produce the best possible model that will address the problem under study.

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