TY - JOUR
T1 - A comment on specification searches in spatial econometrics
T2 - The relevance of Hendry's methodology: A reply
AU - Florax, Raymond J.G.M.
AU - Folmer, Hendrik
AU - Rey, Sergio J.
PY - 2006/3/1
Y1 - 2006/3/1
N2 - Hendry [Hendry, D.F., this issue. Specification searches in spatial econometrics: the relevance of Hendry's methodology. Regional Science and Urban Economics] argues that a comparison between the general-to-specific (Hendry) and specific-to-general (classical) approaches requires standardization of the null rejection frequencies. In this note, we show that the use of standardized finite sample critical values does not have practical implications for applied spatial econometric research, because the Hendry approach is not uniformly most powerful for the spatial error model and the classical approach still outperforms the Hendry approach for the spatial lag model. We also stress that the simulation setup in Florax et al. [Florax, R.J.G.M., Folmer, H., Rey, S.J., 2003. Specification searches in spatial econometrics: the relevance of Hendry's methodology. Regional Science and Urban Economics 33, 557-579] provides an adequate representation of the empirical practice in applied spatial econometric research.
AB - Hendry [Hendry, D.F., this issue. Specification searches in spatial econometrics: the relevance of Hendry's methodology. Regional Science and Urban Economics] argues that a comparison between the general-to-specific (Hendry) and specific-to-general (classical) approaches requires standardization of the null rejection frequencies. In this note, we show that the use of standardized finite sample critical values does not have practical implications for applied spatial econometric research, because the Hendry approach is not uniformly most powerful for the spatial error model and the classical approach still outperforms the Hendry approach for the spatial lag model. We also stress that the simulation setup in Florax et al. [Florax, R.J.G.M., Folmer, H., Rey, S.J., 2003. Specification searches in spatial econometrics: the relevance of Hendry's methodology. Regional Science and Urban Economics 33, 557-579] provides an adequate representation of the empirical practice in applied spatial econometric research.
KW - Autocorrelation
KW - Simulated cut-off points
KW - Spatial econometrics
KW - Specification strategy
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U2 - 10.1016/j.regsciurbeco.2005.10.002
DO - 10.1016/j.regsciurbeco.2005.10.002
M3 - Comment/debate
AN - SCOPUS:33645093145
SN - 0166-0462
VL - 36
SP - 300
EP - 308
JO - Regional Science and Urban Economics
JF - Regional Science and Urban Economics
IS - 2
ER -