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Spatial Dynamic Panel Model and System GMM: A Monte Carlo Investigation

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  • Kukenova, Madina
  • Monteiro, Jose-Antonio

Abstract

Since there is so far no estimator that allows to estimate a dynamic panel model that includes a spatial lag as well as other potential endogenous variables. This paper wants to determine if it is suitable to instrument the spatial lag variable (which is by de�finition endogenous/simultaneous) using the instruments proposed by system GMM, i.e. lagged spatial lag values. The Monte Carlo investigation highlights the possibility to estimate a dynamic spatial lag model using the extended GMM proposed by Arellano and Bover (1995) and Blundell and Bover (1998), especially when N and T are large.

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File URL: http://mpra.ub.uni-muenchen.de/11569/
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File URL: http://mpra.ub.uni-muenchen.de/14319/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11569.

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Date of creation: Jul 2008
Date of revision: Nov 2008
Handle: RePEc:pra:mprapa:11569

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Keywords: Spatial Econometrics; Dynamic Panel Model; System GMM; Monte Carlo Simulations;

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  21. Kelejian, Harry H & Prucha, Ingmar R, 1999. "A Generalized Moments Estimator for the Autoregressive Parameter in a Spatial Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 509-33, May.
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