Estimation of Spatial Regression Models with Autoregressive Errors by Two Stage Least Squares Procedures: A Serious Problem

Abstract

Various two stage least squares procedures have been suggested for the estimation of the autoregressive parameter in the spatial autoregressive model of order one. These procedures are computationally convenient and so their use is "tempting". In this paper we show that these procedures are, in general, not consistent and therefore should not be used.Spatial Models, Autocorrelation, Two Stage Least Squares