A comment on specification searches in spatial econometrics: the relevance of Hendry's methodology: A reply

R.J.G.M. Florax, H. Folmer, S.J. Rey

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17 Citations (Scopus)

Abstract

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.
Original languageEnglish
Pages (from-to)300-308
JournalRegional Science and Urban Economics
Volume36
Issue number2
DOIs
Publication statusPublished - 2006

Keywords

  • tests

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