I consider a panel vector-autoregressive model with cross-sectional dependence of the disturbances characterized by a spatial autoregressive process. I propose a three-step estimation procedure. Its first step is an instrumental variable estimation that ignores the spatial correlation. In the...

This paper suggests that one should account for the endogeneity of important explanatory variables and the persistence of technology shocks when analyzing spatial convergence among regions.Specifically, it is argued that a systems approach is called for that includes the average growth rate and...