GMM_estimation_of_Spatial_Panels_with_Fixed_Effects

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1、GMMestimationofSpatialPanelswithFixedE¤ectsF.MosconeE.TosettiBrunelUniversityUniversityofCambridgeJanuary19,2010AbstractInthispaperweconsidertheestimationofapaneldataregressionmodelwithspatialau-toregressivedisturbances,…xede¤ectsandunknownheteroskedasticity.Followingthewor

2、kbyKelejianandPrucha(1999),LeeandLiu(2006a)andothers,weadopttheGeneralizedMethodofMoments(GMM)andconsiderasmomentsasetlinearquadraticconditionsinthedisturbances.AsinLeeandLiu(2006a),weassumethattheinnermatricesinthequadraticformshavezerodiagonalelementstorobustifymomentsagai

3、nstunknownheteroskedastic-ity.WederivetheasymptoticdistributionoftheGMMestimatorbasedonsuchconditions.Hence,wecarryoutsomeMonteCarloexperimenttoinvestigatethesmallsamplepropertiesofGMMestimatorsbasedonvarioussetsofmomentconditions.1IntroductionGMMestimationofspatialregressio

4、nmodelsinasinglecrosssectionalsettinghasbeenoriginallyadvancedbyKelejianandPrucha(1999).Theyfocusedonaregressionequationwithspatialautoregressive(SAR)disturbances,andsuggestedtheuseofthreemomentconditionsthatexploitthepropertiesofdisturbancesimpliedbyastandardsetofassumption

5、s.Estimationconsistsofsolvinganon-linearoptimizationproblem,whichyieldsaconsistentestimatorunderanumberofregularityconditions.Recently,considerableworkhasbeencarriedouttoextendtheprocedureadvancedbyKelejianandPruchainvariousdirections.Liu,Lee,andBollinger(2006)andLeeandLiu(2

6、006a)suggestedasetofmomentsthatencompassKelejianandPruchaconditionsasspecialcases.Theyconsideredavectoroflinearandquadraticconditionsintheerrorterm,wherethematricesappearinginthelinearandquadraticformshaveboundedrowandcolumnnorms(seealsoLee(2007)).Hence,theyfocusedontheprobl

7、emofselectingthematricesappearinginthevectoroflinearandquadraticmomentconditions,inordertoobtainthelowestvariancefortheGMMestimator.LinandLee(2005)alsoshowedthatthesemomentscanbemaderobustagainstunknownheteroskedasticitybyimposingthatthediagonalelementsofinnermatricesarezero

8、.Theauthorsacknowledge…nancialsupportfromESRC(Ref.no.RES-061-25-0317).1Lee