We build a simple diagnostic criterion for approximate factor structure in large panel datasets. Given observable factors, the criterion checks whether the errors are weakly cross-sectionally correlated or share at least one unobservable common factor (interactive effects). A general version...

This chapter surveys recent econometric methodologies for inference in large dimensional conditional factor models in finance. Changes in the business cycle and asset characteristics induce time variation in factor loadings and risk premia to be accounted for. The growing trend in the use of...

The performance in finite samples is examined of inference obtained by variants of the Arellano-Bond and the Blundell-Bond GMM estimation techniques for single dynamic panel data models with possibly endogenous regressors and cross-sectional heteroskedasticity. By simulation the effects are...

The performance in finite samples is examined of inference obtained by variants of the Arellano-Bond and the Blundell-Bond GMM estimation techniques for single dynamic panel data models with possibly endogenous regressors and cross-sectional heteroskedasticity. By simulation the effects are...

Following Lancaster (2002), we propose a strategy to solve the incidental parameter problem. The method is demonstrated under a simple panel Poisson count model. We also extend the strategy to accomodate cases when information orthogonality is unavailable, such as the linear AR(p) panel model....

Studies employing Arellano-Bond and Blundell-Bond generalized method of moments (GMM) estimation for linear dynamic panel data models are growing exponentially in number. However, for researchers it is hard to make a reasoned choice between many different possible implementations of these...

This paper develops consistent model and moment selection criteria for GMM estimation. The criteria select the correct model specification and all correct moment conditions asymptotically. The selection criteria resemble the widely used likelihood-based selection criteria BIC, HQIC, and AIC....

The sustained current account deficit in any country has an important implication for policy. If it continues, then it suggests that the regime ought to have no motivation to avoid or to diminish its international debt. In this paper, we test empirically the relationship among current account...

In this paper we present a unit root test against a nonlinear dynamic heterogenous panel with each cross section modelled as an LSTAR model. All parameters are viewed as cross section specific. We allow for serially correlated residuals over time and heterogenous variance among cross sections....

In this paper we derive a unit root test against a Panel Logistic Smooth Transition Autoregressive (PLSTAR). The analysis is concentrated on the case where the time dimension is fixed and the cross section dimension tends to infinity. Under the null hypothesis of a unit root, we show that the...