Regarding VIF analysis in Panel Data

[Apurva Shukla]

Respected Sir and group members,

Namaskar!

While checking multicollinearity, the mean VIF is 7.65 and out of 7 independent variables, individual VIF for 6 are below 10 but for one independent variable the individual vif is 10.45.

So, whether I should go for the mean VIF only or conclude that there is no multicollinearity or I should go for PCA, as I don't want to remove that variable?

I would appreciate if I can get a clear explanation and further procedure to be followed.

With great regards

Apurva Shukla

Research Scholar

NIT, Prayagraj

[Miklesh Yadav]

Dear Apurva jee, 

If there is multicollinearity only in one variable, you better to drop that variable. PCA doesn't work here. 

Regards

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[Apurva Shukla]

Thank you for your response, Sir.

But that variable is an important and most relevant one for the study,  which I don't want to remove?

So can you please suggest any alternate solution to this problem?

Regards

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