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Model selection using J-test for the spatial autoregressive model vs. the matrix exponential spatial model

  • Han, Xiaoyi
  • Lee, Lung-fei

We consider using the J-test procedure for the non-nested model selection problem between the spatial autoregressive (SAR) model and the matrix exponential spatial specification (MESS) model. The 2SLS and GMM methods are used to implement the J-test procedure and derive several test statistics under the GMM framework. We investigate the behavior of those J-test statistics in terms of pseudo true values. We extend the J-test procedure into the setting when error terms in the model are with unknown heteroskedasticity. Monte Carlo results suggest with strong spatial dependence the J-test statistics can have good power to distinguish the SAR and MESS models.

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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 43 (2013)
Issue (Month): 2 ()
Pages: 250-271

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Handle: RePEc:eee:regeco:v:43:y:2013:i:2:p:250-271
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