Seemingly Unrelated Regressions with Spatial Error Components
Center for Policy Research Working Paper No. 125
39 Pages Posted: 11 Apr 2011
Date Written: September 1, 2010
This paper considers various estimators using panel data seemingly unrelated regressions (SUR) with spatial error correlation. The true data generating process is assumed to be SUR with spatial error of the autoregressive or moving average type. Moreover, the remainder term of the spatial process is assumed to follow an error component structure. Both maximum likelihood and generalized moments (GM) methods of estimation are used. Using Monte Carlo experiments, we check the performance of these estimators and their forecasts under misspecification of the spatial error process, various spatial weight matrices, and heterogeneous versus homogeneous panel data models.
Keywords: Seemingly unrelated regressions, Panel data, Spatial dependence, Heterogeneity
JEL Classification: C33
Suggested Citation: Suggested Citation