## variance inflation factor

For technical questions regarding estimation of single equations, systems, VARs, Factor analysis and State Space Models in EViews. General econometric questions and advice should go in the Econometric Discussions forum.

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lnp3
Posts: 69
Joined: Sat Oct 01, 2011 7:28 pm

### variance inflation factor

dear forum,

I am using Eviews 8. How can I test multi-collinearity? I am always using pairwise correlation matrix to control MC (among independent variables) and dropping variables that cause high inter-correlation (let's say over 0.4; 0.5)

however, Is there any test of VIF? variance inflation factor? If so, what is the determination criterion?

as always, I highly appreciate your help.

lnp3

EViews Gareth
Fe ddaethom, fe welon, fe amcangyfrifon
Posts: 12579
Joined: Tue Sep 16, 2008 5:38 pm

### Re: variance inflation factor

After you've estimated your equation, you can click View->Coefficient Diagnostics->Vif

lnp3
Posts: 69
Joined: Sat Oct 01, 2011 7:28 pm

### Re: variance inflation factor

thank you Eviews Gareth.

lnp3
Posts: 69
Joined: Sat Oct 01, 2011 7:28 pm

### Re: variance inflation factor

dear forum,

how can i read these variance inflation factors in Eviews 8? when are variables considered to be multi-collinear?

Variance Inflation Factors
Date: 08/11/13 Time: 07:32
Sample: 2006 2012
Included observations: 178

Coefficient Uncentered
Variable Variance VIF

D(TNINTEX) 0.062030 2.016873
D(MS) 4.97E+13 2.446379
D(RIGL) 3.63E+08 1.417163
D(TCGDP) 1.21E+09 2.824274
D(MBGDP) 3.27E+10 1.950917
D(FFGDP) 5.90E+08 1.339142

startz
Non-normality and collinearity are NOT problems!
Posts: 3577
Joined: Wed Sep 17, 2008 2:25 pm

### Re: variance inflation factor

Why do you care if the variables are multi-collinear?

lnp3
Posts: 69
Joined: Sat Oct 01, 2011 7:28 pm

### Re: variance inflation factor

it is asked in a review report.

startz
Non-normality and collinearity are NOT problems!
Posts: 3577
Joined: Wed Sep 17, 2008 2:25 pm

### Re: variance inflation factor

lnp3 wrote:it is asked in a review report.

Hard to argue with that

lnp3
Posts: 69
Joined: Sat Oct 01, 2011 7:28 pm

### Re: variance inflation factor

I was informed that Gujarati says that VIF> 10 then Multicoloinarity exists,and some others restrict it to 5 however we take 10.

Is this rule for entire test? or individual variables? Eviews does not report the entire test. It reports for individual variables. Please see results above.

I hope somebody can help me with this?

thanks a lot.