Residualization: justification, properties and application
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Taylor and Francis
Materia
Multicolinealidad Multicollinearity Collinearity Econometric Isolated effect
Date
2019Referencia bibliográfica
Published version: Catalina B. García, Román Salmerón, Claudia García & José García (2020) Residualization: justification, properties and application, Journal of Applied Statistics, 47:11, 1990-2010. https://doi.org/10.1080/02664763.2019.1701638
Abstract
Although it is usual to find collinearity in econometric models, it is commonly disregarded. An extended solution is to eliminate the variable causing the problem but, in some cases, this decision can affect the goal of the research. Alternatively, residualization not only allows mitigation of collinearity, but it also provides an alternative interpretation of the coefficients isolating the effect of the residualized variable. This paper fully develops the residualization procedure and justifies its application not only for dealing with multicollinearity but also for separating the individual effects of the regressor variables. This contribution is illustrated by two econometric models with financial and ecological data, although it can also be extended to many different fields.
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