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A threshold extension of spatial dynamic panel model with fixed effects

Author

Listed:
  • Junyue Wu

    (Tohoku University)

  • Yasumasa Matsuda

    (Tohoku University)

Abstract

This paper proposes a threshold extension of the spatial dynamic panel data (SDPD) model with fixed effects. We introduce a threshold variable to account for regional dependencies of parameters in SDPD models. Moreover, we applied an extension of Yang (J Econom 205(2):423–447, 2018) proposed unified M-estimation to estimate the parameters in the threshold SDPD models, where the consistency and asymptotic normality are established theoretically when the number of cross-sectional units tends to be infinite. The M-estimation is compared with the conditional quasi-maximum likelihood estimation by Monte Carlo experiments, showing that the M-estimation yields an estimation of less bias in cases of short time panels with robust standard errors under non-normality. We illustrate an empirical application of the threshold SDPD model to the U.S. state-level GDP and power usage growth data from 1998 to 2018, detecting the non-trivial regional dependencies of SDPD model parameters.

Suggested Citation

  • Junyue Wu & Yasumasa Matsuda, 2021. "A threshold extension of spatial dynamic panel model with fixed effects," Journal of Spatial Econometrics, Springer, vol. 2(1), pages 1-30, December.
    • Handle: RePEc:spr:jospat:v:2:y:2021:i:1:d:10.1007_s43071-021-00008-1
    DOI: 10.1007/s43071-021-00008-1
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    References listed on IDEAS

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    1. LeSage, James P. & Chih, Yao-Yu, 2018. "A Bayesian spatial panel model with heterogeneous coefficients," Regional Science and Urban Economics, Elsevier, vol. 72(C), pages 58-73.
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    4. Michele Aquaro & Natalia Bailey & M. Hashem Pesaran, 2015. "Quasi Maximum Likelihood Estimation of Spatial Models with Heterogeneous Coefficients," CESifo Working Paper Series 5428, CESifo.
    5. Kapoor, Mudit & Kelejian, Harry H. & Prucha, Ingmar R., 2007. "Panel data models with spatially correlated error components," Journal of Econometrics, Elsevier, vol. 140(1), pages 97-130, September.
    6. Yu, Jihai & de Jong, Robert & Lee, Lung-fei, 2008. "Quasi-maximum likelihood estimators for spatial dynamic panel data with fixed effects when both n and T are large," Journal of Econometrics, Elsevier, vol. 146(1), pages 118-134, September.
    7. Yang, Zhenlin, 2018. "Unified M-estimation of fixed-effects spatial dynamic models with short panels," Journal of Econometrics, Elsevier, vol. 205(2), pages 423-447.
    8. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, vol. 93(2), pages 345-368, December.
    9. Michele Aquaro & Natalia Bailey & M. Hashem Pesaran, 2015. "Quasi Maximum Likelihood Estimation of Spatial Models with Heterogeneous Coefficients," Working Papers 749, Queen Mary University of London, School of Economics and Finance.
    10. Mahalingam, Brinda & Orman, Wafa Hakim, 2018. "GDP and energy consumption: A panel analysis of the US," Applied Energy, Elsevier, vol. 213(C), pages 208-218.
    11. Lee, Lung-fei & Yu, Jihai, 2010. "Some recent developments in spatial panel data models," Regional Science and Urban Economics, Elsevier, vol. 40(5), pages 255-271, September.
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    More about this item

    Keywords

    Spatial dynamic panel data model; Short panel data; M-estimation; Fixed effect; Threshold extension;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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