A matrix exponential spatial specification

We introduce the matrix exponential as a way of modelling spatially dependent data. The matrix exponential spatial specification (MESS) simplifies the log-likelihood allowing a closed form solution to the problem of maximum-likelihood estimation, and greatly simplifies the Bayesian estimation of the model. The MESS can produce estimates and inferences similar to those from conventional spatial autoregressive models, but has analytical, computational, and interpretive advantages. We present maximum likelihood and Bayesian approaches to the estimation of this spatial model specification along with methods of model comparisons over different explanatory variables and spatial specifications. (C) 2006 Elsevier B.V. All rights reserved.