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Forecasting spatially dependent origin and destination commodity flows

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Abstract

We explore origin–destination forecasting of commodity flows between 15 Spanish regions, using data covering the period from 1995 to 2004. The 1-year-ahead forecasts are based on a recently introduced spatial autoregressive variant of the traditional gravity model. Gravity (or spatial interaction models) attempt to explain variation in \(N = n^2\) flows between \(n\) origin and destination regions that reflect a vector arising from an \(n\) by \(n\) flow matrix. The spatial autoregressive variant of the gravity model used here takes into account spatial dependence between flows from regions neighboring both the origin and destinations during estimation and forecasting. One-year-ahead forecast accuracy of non-spatial and spatial models are compared.

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Notes

  1. The external border or frontier effect has been studied by McCallum (1995), Helliwell (1996, 1998), Anderson and van Wincoop (2003), Okubo (2004), Gil et al. (2005), Nitsch (2000), Evans (2003) and Chen (2004).

  2. Helliwell (1996), Wolf (2000) and Combes et al. (2005) among others.

  3. We use the symbol \(\otimes \) to denote a Kronecker product.

  4. For the robust model \(A = (I_N - \rho W_c ) V^{1/2}\) and \(\Omega = \sigma ^2_{\varepsilon } (A^{\prime } V^{-1} A)^{-1}\), where \(V\) is a diagonal matrix containing the variance scalar estimates.

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Authors and Affiliations

  1. Department of Finance & Economics, Texas State University, San Marcos, TX,  78666, USA

    James P. LeSage

  2. Departamento de Análisis Económico: Teoría Económica e Historia Económica, Universidad Autónoma de Madrid, 28049,  Madrid, Spain

    Carlos Llano-Verduras

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  1. James P. LeSage
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  2. Carlos Llano-Verduras
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Correspondence to James P. LeSage.

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LeSage, J.P., Llano-Verduras, C. Forecasting spatially dependent origin and destination commodity flows. Empir Econ 47, 1543–1562 (2014). https://doi.org/10.1007/s00181-013-0786-2

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  • DOI: https://doi.org/10.1007/s00181-013-0786-2

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