Power of Moran’s I Test for Spatial Dependence in Panel Data Models with Time Varying Spatial Weights Matrices

Ou Bianling (), Zhao Xin () and Wang Mingxi ()
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Ou Bianling: School of Management Science and Engineering, Central University of Finance and Economics, Beijing102206, China
Zhao Xin: School of Management Science and Engineering, Central University of Finance and Economics, Beijing100081, China
Wang Mingxi: School of International Trade and Economics, University of International Business and Economics, Beijing100029, China

Journal of Systems Science and Information, 2015, vol. 3, issue 5, 463-471

Abstract: The spatial weights matrix is usually specified to be time invariant. However, when it are constructed with economic/socioeconomic distance, trade /demographic/climatic characteristics, these characteristics might be changing over time, and then the spatial weights matrix substantially varies over time. This paper focuses on power of Moran’s I test for spatial dependence in panel data models with where spatial weights matrices can be time varying (TV-Moran). Compared with Moran’s I test with time invariant spatial weights matrices (TI-Moran), the empirical power of TV-Moran test for spatial dependence are evaluated. Our extensive Monte Carlo simulation results indicate that Moran’s I test with misspecified time invariant spatial weights matrices is questionable; Instead, TV-Moran test has shown superiority in higher power, especially for cases with negative spatial correlation parameters and the large time dimension.

Keywords: time varying spatial weights matrices; Moran’s I; spatial dependence; panel data models; Monte Carlo simulations (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:3:y:2015:i:5:p:463-471:n:7

DOI: 10.1515/JSSI-2015-0463

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