IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Parameter Estimation and Inference with Spatial Lags and Cointegration

  • Mutl, Jan

    (EBS Business School, Wiesbaden, Germany)

  • Sögner, Leopold

    (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria)

Registered author(s):

We study dynamic panel data models where the long run outcome for a particular crosssection is affected by a weighted average of the outcomes in the other cross-sections. We show that imposing such a structure implies several cointegrating relationships that are nonlinear in the coefficients to be estimated. Assuming that the weights are exogenously given, we extend the dynamic ordinary least squares methodology and provide a dynamic two-stage least squares estimator. We derive the large sample properties of our proposed estimator and investigate its small sample distribution in a simulation study. Then our methodology is applied to US financial market data, which consist of credit default swap spreads, firm specific and industry data. A "closeness" measure for firms is based on inputoutput matrices. Our estimates show that this particular form of spatial correlation of credit default spreads is substantial and highly significant.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ihs.ac.at/publications/eco/es-296.pdf
File Function: First version, 2013
Download Restriction: no

Paper provided by Institute for Advanced Studies in its series Economics Series with number 296.

as
in new window

Length: 60 pages
Date of creation: May 2013
Date of revision:
Handle: RePEc:ihs:ihsesp:296
Contact details of provider: Postal: Stumpergasse 56, A-1060 Vienna, Austria
Phone: ++43 - (0)1 - 599 91 - 0
Fax: ++43 - (0)1 - 599 91 - 555
Web page: http://www.ihs.ac.at

More information through EDIRC

Order Information: Postal: Institute for Advanced Studies - Library, Stumpergasse 56, A-1060 Vienna, Austria

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. James H. Stock & Mark W. Watson, 1991. "A simple estimator of cointegrating vectors in higher order integrated systems," Working Paper Series, Macroeconomic Issues 91-3, Federal Reserve Bank of Chicago.
  2. Kapoor, Mudit & Kelejian, Harry H. & Prucha, Ingmar R., 2007. "Panel data models with spatially correlated error components," Journal of Econometrics, Elsevier, vol. 140(1), pages 97-130, September.
  3. Binder, Michael & Hsiao, Cheng & Pesaran, M. Hashem, 2005. "Estimation And Inference In Short Panel Vector Autoregressions With Unit Roots And Cointegration," Econometric Theory, Cambridge University Press, vol. 21(04), pages 795-837, August.
  4. Hull, John & Predescu, Mirela & White, Alan, 2004. "The relationship between credit default swap spreads, bond yields, and credit rating announcements," Journal of Banking & Finance, Elsevier, vol. 28(11), pages 2789-2811, November.
  5. Nelson C. Mark & Donggyu Sul, 2002. "Cointegration Vector Estimation by Panel DOLS and Long-Run Money Demand," NBER Technical Working Papers 0287, National Bureau of Economic Research, Inc.
  6. Zhu, Haibin & Tarashev, Nikola A., 2008. "The pricing of correlated default risk: evidence from the credit derivatives market," Discussion Paper Series 2: Banking and Financial Studies 2008,09, Deutsche Bundesbank, Research Centre.
  7. M. Ruth & K. Donaghy & P. Kirshen, 2006. "Introduction," Chapters, in: Regional Climate Change and Variability, chapter 1 Edward Elgar.
  8. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, March.
  9. Deistler, Manfred & Seifert, Hans-Gunther, 1978. "Identifiability and Consistent Estimability in Econometric Models," Econometrica, Econometric Society, vol. 46(4), pages 969-80, July.
  10. John Y. Campbell & Glen B. Taksler, 2003. "Equity Volatility and Corporate Bond Yields," Journal of Finance, American Finance Association, vol. 58(6), pages 2321-2350, December.
  11. Jansson, Michael, 2002. "Consistent Covariance Matrix Estimation For Linear Processes," Econometric Theory, Cambridge University Press, vol. 18(06), pages 1449-1459, December.
  12. Jan Ericsson & Kris Jacobs & Rodolfo A. Oviedo, 2004. "The Determinants of Credit Default Swap Premia," CIRANO Working Papers 2004s-55, CIRANO.
  13. Masao Ogaki & Nelson Mark & Donggyu Sul, 2004. "Dynamic Seemingly Unrelated Cointegrating Regression," Working Papers 04-02, Ohio State University, Department of Economics.
  14. Jorion, Philippe & Zhang, Gaiyan, 2007. "Good and bad credit contagion: Evidence from credit default swaps," Journal of Financial Economics, Elsevier, vol. 84(3), pages 860-883, June.
  15. Pierre Collin-Dufresne, 2001. "The Determinants of Credit Spread Changes," Journal of Finance, American Finance Association, vol. 56(6), pages 2177-2207, December.
  16. Eiji Kurozumi & Purevdorj Tuvaandorj, 2010. "Model Selection Criteria in Multivariate Models with Multiple Structural Changes," Global COE Hi-Stat Discussion Paper Series gd10-144, Institute of Economic Research, Hitotsubashi University.
  17. Phillips, Peter C B & Hansen, Bruce E, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 99-125, January.
  18. Zhou, Chunsheng, 2001. "An Analysis of Default Correlations and Multiple Defaults," Review of Financial Studies, Society for Financial Studies, vol. 14(2), pages 555-76.
  19. Davidson, James, 1994. "Stochastic Limit Theory: An Introduction for Econometricians," OUP Catalogue, Oxford University Press, number 9780198774037, March.
  20. Kejriwal, Mohitosh & Perron, Pierre, 2008. "Data Dependent Rules For Selection Of The Number Of Leads And Lags In The Dynamic Ols Cointegrating Regression," Econometric Theory, Cambridge University Press, vol. 24(05), pages 1425-1441, October.
  21. Peter C. B. Phillips & Hyungsik R. Moon, 1999. "Linear Regression Limit Theory for Nonstationary Panel Data," Econometrica, Econometric Society, vol. 67(5), pages 1057-1112, September.
  22. Dale J. Poirier, 1995. "Intermediate Statistics and Econometrics: A Comparative Approach," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161494, June.
  23. Ruud, Paul A., 2000. "An Introduction to Classical Econometric Theory," OUP Catalogue, Oxford University Press, number 9780195111644, March.
  24. Schneider, Paul & Sögner, Leopold & Veža, Tanja, 2011. "The Economic Role of Jumps and Recovery Rates in the Market for Corporate Default Risk," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(06), pages 1517-1547, January.
  25. Mutl, Jan & Sögner, Leopold, 2013. "Parameter Estimation and Inference with Spatial Lags and Cointegration," Economics Series 296, Institute for Advanced Studies.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ihs:ihsesp:296. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Doris Szoncsitz)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.