Publication Type
Journal Article
Version
acceptedVersion
Publication Date
3-2020
Abstract
We consider the estimation and inference of fixed effects (FE) spatial dynamic panel data (SDPD) models under small T and unknown heteroskedasticity by extending the M-estimation strategy for homoskedastic FE-SDPD model of Yang (2018, Journal of Econometrics). Unbiased estimating equations are obtained by adjusting the conditional quasi-score functions given the initial observations, leading to M-estimators that are free from the initial conditions and robust against unknown cross-sectional heteroskedasticity. Consistency and asymptotic normality of the proposed M-estimator are established. The standard errors are obtained by representing the estimating equations as sums of martingale differences. Monte Carlo results show that the proposed M-estimators have good finite sample performance. The practical importance and relevance of allowing for heteroskedasticity in the model is illustrated using data on sovereign risk spillover.
Keywords
Adjusted quasi score, Dynamic panels, Fixed effects, Initial-condition, Martingale difference, Short panels, Spatial effects, Unknown heteroskedasticity
Discipline
Econometrics
Research Areas
Econometrics
Publication
Regional Science and Urban Economics
Volume
81
First Page
1
Last Page
20
ISSN
0166-0462
Identifier
10.1016/j.regsciurbeco.2020.103520
Publisher
Elsevier
Citation
LI, Liyao and YANG, Zhenlin.
Estimation of fixed effects spatial dynamic panel data models with small T and unknown heteroskedasticity. (2020). Regional Science and Urban Economics. 81, 1-20.
Available at: https://ink.library.smu.edu.sg/soe_research/2360
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.regsciurbeco.2020.103520