Testing for a Structural Break in a Spatial Panel Model
Aparna Sengupta ()
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Aparna Sengupta: Bates White Economic Consulting, 1300 Eye street NW Washington DC 20005, USA
Econometrics, 2017, vol. 5, issue 1, 1-17
We consider the problem of testing for a structural break in the spatial lag parameter in a panel model (spatial autoregressive). We propose a likelihood ratio test of the null hypothesis of no break against the alternative hypothesis of a single break. The limiting distribution of the test is derived under the null when both the number of individual units N and the number of time periods T is large or N is ﬁxed and T is large. The asymptotic critical values of the test statistic can be obtained analytically. We also propose a break-date estimator that can be employed to determine the location of the break point following evidence against the null hypothesis. We present Monte Carlo evidence to show that the proposed procedure performs well in ﬁnite samples. Finally, we consider an empirical application of the test on budget spillovers and interdependence in ﬁscal policy within the U.S. states.
Keywords: panel model; structural change; spatial econometrics; spatio-temporal; U.S. state budget (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jecnmx:v:5:y:2017:i:1:p:12-:d:92290
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