Bootstrap LM tests for higher-order spatial effects in spatial linear regression models

Zhenlin Yang

Empirical Economics, 2018, vol. 55, issue 1, No 4, 35-68

Abstract: Abstract This paper first extends the methodology of Yang (J Econom 185:33–59, 2015) to allow for non-normality and/or unknown heteroskedasticity in obtaining asymptotically refined critical values for the LM-type tests through bootstrap. Bootstrap refinements in critical values require the LM test statistics to be asymptotically pivotal under the null hypothesis, and for this we provide a set of general methods for constructing LM and robust LM tests. We then give detailed treatments for two general higher-order spatial linear regression models: namely the $$\mathtt{SARAR}(p,q)$$ SARAR ( p , q ) model and the $$\mathtt{MESS}(p,q)$$ MESS ( p , q ) model, by providing a complete set of non-normality robust LM and bootstrap LM tests for higher-order spatial effects, and a complete set of LM and bootstrap LM tests robust against both unknown heteroskedasticity and non-normality. Monte Carlo experiments are run, and results show an excellent performance of the bootstrap LM-type tests.

Keywords: Asymptotic pivot; Bootstrap; Heteroskedasticity; LM test; Spatial lag; Spatial error; Matrix exponential; Wild bootstrap; Bootstrap critical values; C12; C15; C18; C21 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s00181-018-1453-4

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