Detection of Near-Nulticollinearity through Centered and Noncentered Regression
Román Salmerón Gómez, Catalina Beatriz García García, José Garcı́a Pérez
Abstract
This paper analyzes the diagnostic of near-multicollinearity in a multiple linear regression from auxiliary centered (with intercept) and noncentered (without intercept) regressions. From these auxiliary regressions, the centered and noncentered variance inflation factors (VIFs) are calculated. An expression is also presented that relates both of them. In addition, this paper analyzes why the VIF is not able to detect the relation between the intercept and the rest of the independent variables of an econometric model. At the same time, an analysis is also provided to determine how the auxiliary regression applied to calculate the VIF can be useful to detect this kind of multicollinearity.