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On vector autoregressive modeling in space and time

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  • Valter Giacinto

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Abstract

Despite the fact that it provides a potentially useful analytical tool, allowing for the joint modeling of dynamic interdependencies within a group of connected areas, until lately the VAR approach had received little attention in regional science and spatial economic analysis. This paper aims to contribute in this field by dealing with the issues of parameter identification and estimation and of structural impulse response analysis. In particular, there is a discussion of the adaptation of the recursive identification scheme (which represents one of the more common approaches in the time series VAR literature) to a space-time environment. Parameter estimation is subsequently based on the Full Information Maximum Likelihood (FIML) method, a standard approach in structural VAR analysis. As a convenient tool to summarize the information conveyed by regional dynamic multipliers with a specific emphasis on the scope of spatial spillover effects, a synthetic space-time impulse response function (STIR) is introduced, portraying average effects as a function of displacement in time and space. Asymptotic confidence bands for the STIR estimates are also derived from bootstrap estimates of the standard errors. Finally, to provide a basic illustration of the methodology, the paper presents an application of a simple bivariate fiscal model fitted to data for Italian NUTS 2 regions.

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File URL: http://hdl.handle.net/10.1007/s10109-010-0116-6
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Bibliographic Info

Article provided by Springer in its journal Journal of Geographical Systems.

Volume (Year): 12 (2010)
Issue (Month): 2 (June)
Pages: 125-154

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Handle: RePEc:kap:jgeosy:v:12:y:2010:i:2:p:125-154

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Web page: http://www.springerlink.com/link.asp?id=103079

Related research

Keywords: Structural VAR model; Spatial econometrics; Identification; Space-time impulse response analysis; C32; C33; R10;

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References

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  1. Fabio Canova & Matteo Ciccarelli, 2002. "Estimating multi-country VAR models," Economics Working Papers 920, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2008.
  2. Carlino Gerald & Defina Robert, 1995. "Regional Income Dynamics," Journal of Urban Economics, Elsevier, vol. 37(1), pages 88-106, January.
  3. Zha, Tao, 1999. "Block recursion and structural vector autoregressions," Journal of Econometrics, Elsevier, vol. 90(2), pages 291-316, June.
  4. Badi H. Baltagi & Georges Bresson & Alain Pirotte, 2006. "Panel Unit Root Tests and Spatial Dependence," Center for Policy Research Working Papers 88, Center for Policy Research, Maxwell School, Syracuse University.
  5. repec:wop:humbsf:1999-29 is not listed on IDEAS
  6. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
  7. Michael Beenstock & Daniel Felsenstein, 2007. "Spatial Vector Autoregressions," Spatial Economic Analysis, Taylor & Francis Journals, vol. 2(2), pages 167-196.
  8. Benkwitz, Alexander & Lütkepohl, Helmut & Wolters, Jürgen, 1999. "Comparison of Bootstrap Confidence Intervals for Impulse Responses of German Monetary Systems," CEPR Discussion Papers 2208, C.E.P.R. Discussion Papers.
  9. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  10. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
  11. Gerald Carlino & Robert Defina, 1998. "The Differential Regional Effects Of Monetary Policy," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 572-587, November.
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Citations

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Cited by:
  1. Valter Di Giacinto, 2013. "The dynamics of knowledge production in European regions," ERSA conference papers ersa13p543, European Regional Science Association.
  2. Julian Ramajo & Miguel A. Marquez & Geoffrey J.D. Hewings, 2013. "Spatio-temporal Analysis of Regional Systems: A Multiregional Spatial Vector Autoregressive Model for Spain," ERSA conference papers ersa13p159, European Regional Science Association.
  3. Valter Di Giacinto, 2011. "Foreign trade, home linkages and the spatial transmission of economic fluctuations in Italy," Temi di discussione (Economic working papers) 827, Bank of Italy, Economic Research and International Relations Area.

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