Publication Type

Working Paper

Version

publishedVersion

Publication Date

12-2011

Abstract

A simple and reliable method of inference for the spatial parameter in spatial autoregressive models is introduced, based on a statistic obtained by centering and rescaling the numerator of the concentrated Gaussian score function. The resulted tests and confidence intervals are robust against the distributional misspecifications and are insensitive to the spatial layouts and the error standard deviation. In contrast, the standard methods based on Gaussian score and information matrix may lead to inconsistent inference when errors are non normal, and can be quite sensitive to the spatial layouts and the error standard deviation even when errors are normally distributed. Extensive Monte Carlo results are reported and an empirical illustration is given.

Keywords

Spatial dependence, Confidence interval, LM Tests, Centering, Rescaling, Finite sample performance, Robustness

Discipline

Econometrics

Research Areas

Econometrics

First Page

1

Last Page

28

Publisher

SMU Economics and Statistics Working Paper Series, No. 25-2011

City or Country

Singapore

Copyright Owner and License

Authors

Included in

Econometrics Commons

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