A Flexible Specification of Space–Time AutoRegressive Models

M. Mucciardi and Edoardo Otranto

Working Paper CRENoS from Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia

Abstract: The Space–Time Autoregressive (STAR) model is one of the most widely used models to represent the dynamics of a certain variable recorded at several locations at the same time, capturing both their temporal and spatial relationships. Its advantages are often discussed in terms of parsimony with respect to space-time VAR structures because it considers a single coefficient for each time and spatial lag for the full time span and the full location set. This hypothesis can be very strong; the presence of groups of locations with similar dynamics makes it more realistic. In this work we add a certain degree of flexibility to the STAR model, providing the possibility for coefficients to vary in groups of locations, proposing a new class of flexible STAR models. Such groups are detected by means of a clustering algorithm. The new class or model is compared to the classical STAR and the space-time VAR by simulation experiments and a practical application.

Keywords: spatial weight matrix; space–time models; forecasting; clustering (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:cns:cnscwp:201608

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