Large-Sample Inference on Spatial Dependence
19 Pages Posted: 13 May 2009
Date Written: January 2009
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.
JEL Classification: D74;H77;F13;019
Suggested Citation: Suggested Citation