Asymptotic distribution of the OLS estimator for a mixed spatial model

AbstractWe find the asymptotic distribution of the OLS estimator of the parameters β and ρ in the mixed spatial model with exogenous regressors Yn=Xnβ+ρWnYn+Vn. The exogenous regressors may be bounded or growing, like polynomial trends. The assumption about the spatial matrix Wn is appropriate for the situation when each economic agent is influenced by many others. The error term is a short-memory linear process. The key finding is that in general the asymptotic distribution contains both linear and quadratic forms in standard normal variables and is not normal