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Estimation for spatial dynamic panel data with fixed effects: The case of spatial cointegration

Jihai Yu (), Robert de Jong and Lung-Fei Lee ()

Journal of Econometrics, 2012, vol. 167, issue 1, 16-37

Abstract: Yu et al. (2008) establish asymptotic properties of quasi-maximum likelihood estimators for a stable spatial dynamic panel model with fixed effects when both the number of individuals n and the number of time periods T are large. This paper investigates unstable cases where there are unit roots generated by temporal and spatial correlations. We focus on the spatial cointegration model where some eigenvalues of the data generating process are equal to 1 and the outcomes of spatial units are cointegrated as in a vector autoregressive system. The asymptotics of the QML estimators are developed by reparameterization, and bias correction for the estimators is proposed. We also consider the 2SLS and GMM estimations when T could be small.

Keywords: Spatial autoregression; Dynamic panels; Fixed effects; Quasi-maximum likelihood estimation; Bias correction; Generalized method of moments; Spatial cointegration; Unit root (search for similar items in EconPapers)
JEL-codes: C13 C23 R15 (search for similar items in EconPapers)
Date: 2012
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