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You can use changes instead of levels the advantage

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You can use “ changes” instead of “ levels” . The advantage is that “changes” may not be as highly correlated as their “levels”. 6. Other methods of remedying multicollinearity. Multivariate statistical techniques such as factor analysis and principal components or techniques such as ridge regression are also employed to “solve” the problem of multicollinearity.
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ECON 301 - Introduction to Econometrics I May 2013 METU - Department of Economics Instructor: Dr. Ozan ERUYGUR e-mail: [email protected] Lecture Notes 18 5. Summary The effects of multicollinearity and the means of identifying them are summarized below: Estimates of parameters are still unbiased, consistent, and BLUE. The standard errors of the coefficients might be high, making individual coefficients insignificant. The model might exhibit high R 2 but low t -values: A joint F-test might reject the null hypothesis that several coefficients are zero, but individual t -tests might accept them, leading to an apparent contradiction. Coefficients may change considerably when variables are added or deleted, thus making the interpretation of individual coefficients difficult.
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You can use changes instead of levels The advantage is that...

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