Forecasting with Spatial Panel Data

37 Pages Posted: 30 Jun 2009

See all articles by Badi H. Baltagi

Badi H. Baltagi

Syracuse University; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Georges Bresson

ERMES (CNRS), Université Panthéon-Assas Paris II

Alain Pirotte

ERMES (CNRS), Université Panthéon-Assas Paris II; INRETS-DEST

Abstract

This paper compares various forecasts using panel data with spatial error correlation. The true data generating process is assumed to be a simple error component regression model with spatial remainder disturbances of the autoregressive or moving average type. The best linear unbiased predictor is compared with other forecasts ignoring spatial correlation, or ignoring heterogeneity due to the individual effects, using Monte Carlo experiments. In addition, we check the performance of these forecasts under misspecification of the spatial error process, various spatial weight matrices, and heterogeneous rather than homogeneous panel data models.

Keywords: forecasting, BLUP, panel data, spatial dependence, heterogeneity

JEL Classification: C33

Suggested Citation

Baltagi, Badi H. and Bresson, Georges and Pirotte, Alain, Forecasting with Spatial Panel Data. IZA Discussion Paper No. 4242, Available at SSRN: https://ssrn.com/abstract=1426729 or http://dx.doi.org/10.2139/ssrn.1426729

Badi H. Baltagi (Contact Author)

Syracuse University ( email )

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CESifo (Center for Economic Studies and Ifo Institute) ( email )

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IZA Institute of Labor Economics

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Georges Bresson

ERMES (CNRS), Université Panthéon-Assas Paris II ( email )

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Alain Pirotte

ERMES (CNRS), Université Panthéon-Assas Paris II ( email )

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Paris, Cedex 5, 75005
France

INRETS-DEST

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