The time dependent spatial cross correlation, a study of East Java's regional GDP growth and percentage of Urban, 2014 - 2019

During the latest decade, information based on spatial data has played a more significant role in policy making at the regional level. When the focus in on the regional economic performance, most of the regional economic indicators are the type of variable with spatial interaction. Statistically this type of interaction is measured by spatial correlation. It is also possible that the change of certain regional economic indicators (e.g., through the change of policy) affects another economic indicator of the surrounding regions. In this case, a spatial cross correlation is the suitable measure. The measure can be utilized to predict the direction and the degree of the effect. Both are useful to minimize the negative effects of policy changes. Furthermore, by nature, the observed economic indicators are dynamic over time. This characteristic needs to be accommodated in the measure by using a set of spatial panel data. The time dependence has not been explicitly addressed by the previous studies. Therefore, this study aims to formulate a dynamic-time dependent spatial cross-correlation index, based on spatial panel data. Data on East Java's regional GDP growth and Percentage of Urban at Regencies/Municipalities level, during 2014 - 2019, are used to confirm the performance of the modified measure. The result indicates that the proposed method performs well in measuring the spatial cross correlation between regional GDP growth and Percentage of Urban. The local GDP growth negatively affects the neighbourhood Percentage of Urban, and on the contrary, the local Percentage of Urban positively affects the neighbourhood GDP growth.