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Abstract:

Econometrics Paper
Large-Sample Inference on Spatial Dependence
Peter M Robinson
January 2009
Paper No' EM/2009/533:
Full Paper (pdf)

Tags: spatial dependence; parameter estimation; asymptotic theory; independence testing.

We consider cross-sectional data that exhibit no spatial correla- tion, but are feared to be spatially dependent. We demonstrate that a spatial version of the stochastic volatility model of financial econometrics, entailing a form of spatial autoregression, can explain such behaviour. The parameters are estimated by pseudo Gaussian maximum likelihood based on log-transformed squares, and consistency and asymptotic normality are established. Asymptotically valid tests for spatial independence are developed.