Best Spatial Two‐Stage Least Squares Estimators for a Spatial Autoregressive Model with Autoregressive Disturbances
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- 12 January 2003
- journal article
- Published by Taylor & Francis in Econometric Reviews
- Vol. 22 (4) , 307-335
- https://doi.org/10.1081/etc-120025891
Abstract
Estimation of a cross‐sectional spatial model containing both a spatial lag of the dependent variable and spatially autoregressive disturbances are considered. [Kelejian and Prucha (1998)]described a generalized two‐stage least squares procedure for estimating such a spatial model. Their estimator is, however, not asymptotically optimal. We propose best spatial 2SLS estimators that are asymptotically optimal instrumental variable (IV) estimators. An associated goodness‐of‐fit (or over identification) test is available. We suggest computationally simple and tractable numerical procedures for constructing the optimal instruments.Keywords
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