Heterogeneous spatial dynamic panels with an application to US housing data

Yong Bao and Xiaoyan Zhou

Spatial Economic Analysis, 2023, vol. 18, issue 2, 259-285

Abstract: This paper proposes two models that incorporate both heterogeneity and multiple sources of spatial correlation for dynamic panels. One uses convex combinations of them to form a single weight matrix. The second one includes explicitly different spatial weight matrices to form a higher order model. We use a Bayesian scheme for model estimation by deriving the full conditional distributions of heterogeneous parameters. Our Monte Carlo experiments demonstrate their finite-sample performance relative to a baseline model. In our empirical study we find the importance of including both geographical and non-geographical information in capturing correlations in real house price growth in the United States.

Date: 2023
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DOI: 10.1080/17421772.2022.2118363

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