I have an unbalanced panel on daily data for 8 months for 8 years on a
pollutant. Thus, my T is very large and my N(number of cross-section) is
112. My model contains a lagged dependent variable as a regressor or what
economists refer to as dynamic panel data model. In addition, I have year
and time fixed effects and some other variables.

I wish to test whether my residuals from an OLS regression are spatially
correlated where the spatial correlation dies out as the distance between
the cross-section units decreases.Since I have gridded data, I wish to
specify a rook's scheme for spatial weights.

I don't know how can I do so in the dynamic panel framework with missing
observations and a very large T.So please suggest something. Many thanks in
advance.

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