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A test strategy for spurious spatial regression, spatial nonstationarity, and spatial cointegration

By Jørgen Lauridsen and Reinhold Kosfeld

Abstract

A test strategy consisting of a two-step Lagrange Multiplier test is suggested as a device to reveal spatial nonstationarity and spurious spatial regression. It is further illustrated how the test strategy can be used as a diagnostic for presence of a spatial cointegrating relationship between two variables. Using Monte Carlo simulations it is shown that the small-sample behaviour of the test strategy is as desired in these cases. Copyright (c) 2006 the author(s). Journal compilation (c) 2006 RSAI.

DOI identifier: 10.1111/j.1435-5957.2006.00087.x
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