Bai, Jushan and Li, Kunpeng (2013): Spatial panel data models with common shocks.
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Abstract
Spatial effects and common-shocks effects are of increasing empirical importance. Each type of effect has been analyzed separately in a growing literature. This paper considers a joint modeling of both types. Joint modeling allows one to determine whether one or both of these effects are present. A large number of incidental parameters exist under the joint modeling. The quasi maximum likelihood method (MLE) is proposed to estimate the model. Heteroskedasticity is explicitly estimated. This paper demonstrates that the quasi-MLE is effective in dealing with the incidental parameters problem. An inferential theory including consistency, rate of convergence and limiting distributions is developed. The quasi-MLE can be easily implemented via the EM algorithm, as confirmed by the Monte Carlo simulations. The simulations further reveal the excellent finite sample properties of the quasi-MLE. Some extensions are discussed.
Item Type: | MPRA Paper |
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Original Title: | Spatial panel data models with common shocks |
English Title: | Spatial panel data models with common shocks |
Language: | English |
Keywords: | Panel data models, spatial interactions, common shocks, cross-sectional dependence, incidental parameters, maximum likelihood estimation |
Subjects: | C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C31 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions ; Social Interaction Models C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models |
Item ID: | 52786 |
Depositing User: | Jushan Bai |
Date Deposited: | 09 Mar 2014 23:42 |
Last Modified: | 26 Sep 2019 14:34 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/52786 |