Hostname: page-component-586b7cd67f-2brh9 Total loading time: 0 Render date: 2024-11-21T22:42:31.997Z Has data issue: false hasContentIssue false

CONSISTENT NON-GAUSSIAN PSEUDO MAXIMUM LIKELIHOOD ESTIMATORS OF SPATIAL AUTOREGRESSIVE MODELS

Published online by Cambridge University Press:  06 February 2023

Fei Jin
Affiliation:
Fudan University and Shanghai Institute of International Finance and Economics
Yuqin Wang*
Affiliation:
Shanghai University of Finance and Economics and Key Laboratory of Mathematical Economics (SUFE)
*
Address correspondence to Yuqin Wang, Institute for Advanced Research, Shanghai University of Finance and Economics, Shanghai 200433, China; e-mail: [email protected]
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

This paper studies the non-Gaussian pseudo maximum likelihood (PML) estimation of a spatial autoregressive (SAR) model with SAR disturbances. If the spatial weights matrix $M_{n}$ for the SAR disturbances is normalized to have row sums equal to 1 or the model reduces to a SAR model with no SAR process of disturbances, the non-Gaussian PML estimator (NGPMLE) for model parameters except the intercept term and the variance $\sigma _{0}^{2}$ of independent and identically distributed (i.i.d.) innovations in the model is consistent. Without row normalization of $M_{n}$, the symmetry of i.i.d. innovations leads to consistent NGPMLE for model parameters except $\sigma _{0}^{2}$. With neither row normalization of $M_{n}$ nor the symmetry of innovations, a location parameter can be added to the non-Gaussian pseudo likelihood function to achieve consistent estimation of model parameters except $\sigma _{0}^{2}$. The NGPMLE with no added parameter can have a significant efficiency improvement upon the Gaussian PML estimator and the generalized method of moments estimator based on linear and quadratic moments. We also propose a non-Gaussian score test for spatial dependence, which can be locally more powerful than the Gaussian score test. Monte Carlo results show that our NGPMLE with no added parameter and the score test based on it perform well in finite samples.

Type
ARTICLES
Copyright
© The Author(s), 2023. Published by Cambridge University Press

Footnotes

We are very grateful to the Editor (Peter Phillips), the Co-Editor (Dennis Kristensen), and two anonymous referees for helpful comments that led to substantial improvements of this paper. We also thank Zaichao Du, Zhonghao Fu, Gaosheng Ju, Lung-Fei Lee, Hongjun Li, Xi Qu, Ke Miao, Qiao Wang, Xiaohu Wang, Xingbai Xu, and seminar participants at Fudan University and the 2021 Symposium on Econometrics and Big Data at Xiamen University for helpful comments. Fei Jin gratefully acknowledges the financial support from the National Natural Science Foundation of China (NNSFC) (Nos. 71973030 and 71833004). Yuqin Wang thanks the NNSFC financial support under No. 72103122.

References

REFERENCES

Anselin, L. (1988) Spatial Econometrics: Methods and Models. Kluwer Academic Publishers.CrossRefGoogle Scholar
Anselin, L. (2010) Thirty years of spatial econometrics. Papers in Regional Science 89, 325.CrossRefGoogle Scholar
Anselin, L. & Bera, A. (1998) Spatial dependence in linear regression models with an introduction to spatial econometrics. In Ullah, A. and Giles, D.E. (eds.), Handbook of Applied Economic Statistics, pp. 237289. Marcel Dekker.Google Scholar
Arbia, G. (2014) A Primer for Spatial Econometrics with Applications in R. Springer.Google Scholar
Arbia, G. (2016) Spatial econometrics: A broad view. Foundations and Trends in Econometrics 8, 145265.CrossRefGoogle Scholar
Baltagi, B.H., Egger, P., & Pfaffermayr, M. (2008) Estimating regional trade agreement effects on FDI in an interdependent world. Journal of Econometrics 145, 194208.CrossRefGoogle Scholar
Bao, Y. (2013) Finite-sample bias of the QMLE in spatial autoregressive models. Econometric Theory 29, 6888.CrossRefGoogle Scholar
Blommestein, H. (1983) Specification and estimation of spatial dependence: A discussion of alternative strategies for spatial economic modelling. Regional Science and Urban Economics 13, 251270.CrossRefGoogle Scholar
Blommestein, H. (1985) Elimination of circular routes in spatial dynamic regression equations. Regional Science and Urban Economics 15, 121130.CrossRefGoogle Scholar
Burridge, P. (1980) On the Cliff–Ord test for spatial autocorrelation. Journal of the Royal Statistical Society, Series B 42, 107108.CrossRefGoogle Scholar
Cliff, A. & Ord, J.K. (1973) Spatial Autocorrelation. Pion.Google Scholar
Cliff, A. & Ord, J.K. (1981) Spatial Process: Models and Applications. Pion.Google Scholar
Conley, T.G. (1999) GMM estimation with cross sectional dependence. Journal of Econometrics 92, 145.CrossRefGoogle Scholar
Cressie, N. (1993) Statistics for Spatial Data. Wiley.CrossRefGoogle Scholar
Davidson, J. (1994) Stochastic Limit Theory: An Introduction for Econometricians. Oxford University Press.CrossRefGoogle Scholar
Doğan, O. & Taşpınar, S. (2013) GMM estimation of spatial autoregressive models with moving average disturbances. Regional Science and Urban Economics 43, 903926.CrossRefGoogle Scholar
Fan, J., Qi, L., & Xiu, D. (2014) Quasi-maximum likelihood estimation of GARCH models with heavy-tailed likelihoods. Journal of Business & Economic Statistics 32, 178191.CrossRefGoogle Scholar
Fang, K.T., Kotz, S., & Ng, K.W. (1990) Symmetric Multivariate and Related Distributions. Chapman and Hall.CrossRefGoogle Scholar
Fingleton, B. (2008) A generalized method of moments estimator for a spatial panel model with an endogenous spatial lag and spatial moving average errors. Spatial Economic Analysis 3, 2744.CrossRefGoogle Scholar
Fiorentini, G. & Sentana, E. (2019) Consistent non-Gaussian pseudo maximum likelihood estimators. Journal of Econometrics 213, 321358.CrossRefGoogle Scholar
Francq, C., Lepage, G., & Zakoïan, J.M. (2011) Two-stage non Gaussian QML estimation of GARCH models and testing the efficiency of the Gaussian QMLE. Journal of Econometrics 165, 246257.CrossRefGoogle Scholar
Giles, J.A. & Giles, D.E. (1993) Pre-test estimation and testing in econometrics: Recent developments. Journal of Economic Surveys 7, 145197.CrossRefGoogle Scholar
Gilley, O.W. & Pace, R.K. (1996) On the Harrison and Rubinfeld data. Journal of Environmental Economics and Management 31, 403405.CrossRefGoogle Scholar
Godfrey, L.G. & Orme, C.D. (1991) Testing for skewness of regression disturbances. Economics Letters 37, 3134.CrossRefGoogle Scholar
Gouriéroux, C., Monfort, A., & Trognon, A. (1984) Pseudo maximum likelihood methods: Theory. Econometrica 52, 681700.CrossRefGoogle Scholar
Gupta, A. & Robinson, P.M. (2018) Pseudo maximum likelihood estimation of spatial autoregressive models with increasing dimension. Journal of Econometrics 202, 92107.CrossRefGoogle Scholar
Haining, R.P. (1978) The moving average model for spatial interaction. Transactions of the Institute of British Geographers 3, 202225.CrossRefGoogle Scholar
Harrison, D.J. & Rubinfeld, D.L. (1978) Hedonic housing prices and the demand for clean air. Journal of Environmental Economics and Management 5, 81102.CrossRefGoogle Scholar
Hillier, G. & Martellosio, F. (2018) Exact and higher-order properties of the MLE in spatial autoregressive models, with applications to inference. Journal of Econometrics 205, 402422.CrossRefGoogle Scholar
Jarque, C.M. & Bera, A.K. (1980) Efficient tests for normality, homoscedasticity and serial independence of regression residuals. Economics Letters 6, 255259.CrossRefGoogle Scholar
Jenish, N. & Prucha, I.R. (2009) Central limit theorems and uniform laws of large numbers for arrays of random fields. Journal of Econometrics 150, 8698.CrossRefGoogle ScholarPubMed
Jenish, N. & Prucha, I.R. (2012) On spatial processes and asymptotic inference under near-epoch dependence. Journal of Econometrics 170, 178190.CrossRefGoogle ScholarPubMed
Jin, F. & Lee, L.F. (2019) GEL estimation and tests of spatial autoregressive models. Journal of Econometrics 208, 585612.CrossRefGoogle Scholar
Jin, F., Lee, L.F., & Yang, K. (2022) Best Linear and Quadratic Moments for Spatial Econometric Models and an Application to Spatial Interdependence Patterns of Employment Growth in US Counties. Working paper, School of Economics, Fudan University.Google Scholar
Kelejian, H.H. & Prucha, I.R. (1998) A generalized spatial two-stage least squares procedure for estimating a spatial autoregressive model with autoregressive disturbances. Journal of Real Estate Finance and Economics 17, 99121.CrossRefGoogle Scholar
Kelejian, H.H. & Prucha, I.R. (1999) A generalized moments estimator for the autoregressive parameter in a spatial model. International Economic Review 40, 509533.CrossRefGoogle Scholar
Kelejian, H.H. & Prucha, I.R. (2001) On the asymptotic distribution of the Moran $I$ test statistic with applications. Journal of Econometrics 104, 219257.CrossRefGoogle Scholar
Kelejian, H.H. & Prucha, I.R. (2010) Specification and estimation of spatial autoregressive models with autoregressive and heteroskedastic disturbances. Journal of Econometrics 157, 5367.CrossRefGoogle ScholarPubMed
Lee, J. & Robinson, P.M. (2020) Adaptive inference on pure spatial models. Journal of Econometrics 216, 375393.CrossRefGoogle Scholar
Lee, L.F. (2002) Consistency and efficiency of least squares estimation for mixed regressive, spatial autoregressive models. Econometric Theory 18, 252277.CrossRefGoogle Scholar
Lee, L.F. (2004) Asymptotic distributions of quasi-maximum likelihood estimators for spatial autoregressive models. Econometrica 72, 18991925.CrossRefGoogle Scholar
Lee, L.F. (2007) GMM and 2SLS estimation of mixed regressive, spatial autoregressive models. Journal of Econometrics 137, 489514.CrossRefGoogle Scholar
LeSage, J. & Pace, R.K. (2009) Introduction to Spatial Econometrics. Chapman & Hall/CRC.CrossRefGoogle Scholar
LeSage, J.P. (1999) Spatial Econometrics. Department of Economics, University of Toledo.Google Scholar
LeSage, J.P. & Pace, R.K. (2007) A matrix exponential spatial specification. Journal of Econometrics 140, 190214.CrossRefGoogle Scholar
Lin, M. & Sinnamon, G. (2020) Revisiting a sharpened version of Hadamard’s determinant inequality. Linear Algebra and its Applications 606, 192200.CrossRefGoogle Scholar
Liu, X., Lee, L.F., & Bollinger, C.R. (2010) An efficient GMM estimator of spatial autoregressive models. Journal of Econometrics 159, 303319.CrossRefGoogle Scholar
Moran, P.A.P. (1950) Notes on continuous stochastic phenomena. Biometrika 35, 255260.Google Scholar
Newey, W.K. & McFadden, D. (1994) Large sample estimation and hypothesis testing. In R.F. Engle, D.L. McFadden (eds.), Handbook of Econometrics, vol. 4, Ch. 36, pp. 21112245. Elsevier.CrossRefGoogle Scholar
Newey, W.K. & Steigerwald, D.G. (1997) Asymptotic bias for quasi-maximum-likelihood estimators in conditional heteroskedasticity models. Econometrica 65, 587599.CrossRefGoogle Scholar
Ord, K. (1975) Estimation methods for models of spatial interaction. Journal of the American Statistical Association 70, 120126.CrossRefGoogle Scholar
Pace, R.K. & Barry, R. (1997) Quick computation of spatial autoregressive estimators. Geographical Analysis 29, 232246.CrossRefGoogle Scholar
Pace, R.K. & Gilley, O.W. (1997) Using the spatial configuration of the data to improve estimation. The Journal of Real Estate Finance and Economics 14, 333340.CrossRefGoogle Scholar
Robinson, P.M. (2010) Efficient estimation of the semiparametric spatial autoregressive model. Journal of Econometrics 157, 617.CrossRefGoogle Scholar
Spiring, F. (2011) The refined positive definite and unimodal regions for the Gram–Charlier and Edgeworth series expansion. Advances in Decision Sciences 2011, Article no. 463097.CrossRefGoogle Scholar
White, H. (1994) Estimation, Inference and Specification Analysis. Cambridge University Press.CrossRefGoogle Scholar
Xu, X. & Lee, L.F. (2015) Maximum likelihood estimation of a spatial autoregressive Tobit model. Journal of Econometrics 188, 264280.CrossRefGoogle Scholar
Xu, X. & Lee, L.F. (2018) Sieve maximum likelihood estimation of the spatial autoregressive Tobit model. Journal of Econometrics 203, 96112.CrossRefGoogle Scholar
Yang, K. & Lee, L.F. (2017) Identification and QML estimation of multivariate and simultaneous equations spatial autoregressive models. Journal of Econometrics 196, 196214.CrossRefGoogle Scholar
Supplementary material: PDF

Jin and Wang supplementary material

Jin and Wang supplementary material

Download Jin and Wang supplementary material(PDF)
PDF 2.4 MB