A Survey of Spatial Unit Roots

Badi H. Baltagi, Junjie Shu

Research output: Contribution to journalReview articlepeer-review

Abstract

This paper conducts a brief survey of spatial unit roots within the context of spatial econometrics. We summarize important concepts and assumptions in this area and study the parameter space of the spatial autoregressive coefficient, which leads to the idea of spatial unit roots. Like the case in time series, the spatial unit roots lead to spurious regression because the system cannot achieve equilibrium. This phenomenon undermines the power of the usual Ordinary Least Squares (OLS) method, so various estimation methods such as Quasi-maximum Likelihood Estimate (QMLE), Two Stage Least Squares (2SLS), and Generalized Spatial Two Stage Least Squares (GS2SLS) are explored. This paper considers the assumptions needed to guarantee the identification and asymptotic properties of these methods. Because of the potential damage of spatial unit roots, we study some test procedures to detect them. Lastly, we offer insights into how to relax the compactness assumption to avoid spatial unit roots, as well as the relationship between spatial unit roots and other models, such as the Spatial Dynamic Panel Data (SDPD) model and Lévy–Brownian motion.

Original languageEnglish (US)
Article number1052
JournalMathematics
Volume12
Issue number7
DOIs
StatePublished - Apr 2024

Keywords

  • nonstationarity
  • panel data
  • spatial correlation
  • spatial unit roots
  • spurious spatial regression

ASJC Scopus subject areas

  • Computer Science (miscellaneous)
  • General Mathematics
  • Engineering (miscellaneous)

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