A test to select between spatial weighting matrices

There exist a number of ways of selecting the best spatial weighting matrix in a spatial regression framework. But these methods all work under the assumption that there is only one matrix in the final model and they simply aim to pick the best one. We propose an encompassing tests which allows for...

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Bibliographic Details
Published inJournal of Spatial Econometrics Vol. 4; no. 1
Main Authors Hall, Stephen G., Tavlas, George S., Gefang, Deborah
Format Journal Article
LanguageEnglish
Published Cham Springer International Publishing 01.12.2023
Subjects
Econometrics
Economics
Economics and Finance
Finance
Insurance
Management
Original Paper
Regional/Spatial Science
Statistics for Business
Cross-country spillovers
Spatial estimation
G01
Spatial weighting matrix
E3
G21
Online AccessGet full text
ISSN2662-2998
2662-298X
DOI10.1007/s43071-022-00032-9

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Summary:There exist a number of ways of selecting the best spatial weighting matrix in a spatial regression framework. But these methods all work under the assumption that there is only one matrix in the final model and they simply aim to pick the best one. We propose an encompassing tests which allows for the possibility that the final preferred model may have two or more spatial weighting matrices. We validate the proposed test through a Monte Carlo study. We then illustrate the test by applying it to a two-equation simultaneous system determining sovereign bond ratings and spreads for two groups comprising northern and Southern Euro-area countries.
ISSN:2662-2998
2662-298X
DOI:10.1007/s43071-022-00032-9