The Journal of World-Systems Research (Summer 2003) reported on a study of the link between foreign investments made 16 years earlier and carbon dioxide emissions. The researchers modeled the annual level (y) of CO₂ emissions as a function of seven independent variables for n = 66 developing countries. A matrix given the correlation (r) for each pair of independent variables is shown at the bottom of the page. Identify the independent variables that are highly correlated. What problems may result from including these highly correlated variables in the regression model?

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X7 = In(level of CO2 Independent Variable X2 X3 X4 X5 X6 emissions) X1 = In foreign investments X2 = gross domestic investment .13 57 .30 -38 14 -14 49 36 -47 -14 25 X3 = trade exports 43 -47 -06 -07 X4 = In(GNP) -84 -53 42 X5 = agricultural production X6 = 1 if African Country, O if not 45 -50 -47