Spurious spatial regression with equal weights
AbstractThis note studies the Lee and Yu (2009) spurious regression model for the special case where the weight matrix is normalized and has equal elements, and where the nonstationarity is caused by near unit roots. It shows that spurious spatial regression will not occur in a spatially autoregressive (SAR) model when the spatial weight matrix is row-normalized and has equal weights. In fact, the asymptotic distribution of the OLS estimate will always converge to its true value zero. The only condition required is that the spatial coefficients of the dependent and independent variables be both less than 1, which is a requirement for the SAR model to be an equilibrium model.
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Bibliographic InfoArticle provided by Elsevier in its journal Statistics & Probability Letters.
Volume (Year): 80 (2010)
Issue (Month): 21-22 (November)
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Center for Policy Research Working Papers
89, Center for Policy Research, Maxwell School, Syracuse University.
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