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...

Panel data models with cross-sectionally heteroskedastic data often suffer from the well-known incidental parameters problem. Some recent studies have proposed that the structural parameters (common parameters to all of the cross-sectional entities) can be consistently estimated if they are...

In this paper, we consider a partially linear panel data model with cross-sectional dependence and non-stationarity. Meanwhile, we allow fixed effects to be correlated with the regressors to capture unobservable heterogeneity. Under a general spatial error dependence structure, we then establish...

In this paper, we propose a single-index panel data model with unobserved multiple interactive fixed effects. This model has the advantages of being flexible and of being able to allow for common shocks and their heterogeneous impacts on cross sections, thus making it suitable for the...

In this paper we propose three different concentrated partial maximum likelihood estimators (CPMLE) for a new specification of a spatial dynamic panel data probit (SDPDprobit) model, which allows to deal with cross-sectional dependence, time dependence and individual (spatial) or time fixed...

Simultaneity represents a fundamental problem when estimating the elasticity of substitution between capital and labour. To overcome this problem, a wide variety of external instruments has been applied in the literature. However, the use of instruments may lead to wrong inference if they are...

We consider the problem of determining the number of factors and selecting the proper regressors in linear dynamic panel data models with interactive fixed effects. Based on the preliminary estimates of the slope parameters and factors a la Bai and Ng (2009) and Moon and Weidner (2014a), we...

This paper proposes and implements a tractable approach to detect group structure in panel data. The mechanism works by means of a panel structure model, which assumes that individuals form a number of homogeneous groups in a heterogeneous population. Within each group, the (linear) regression...

Many studies estimate the impact of exposure to some quasi-experimental policy or event using a panel event study design. These models, as a generalized extension of 'difference-in-differences' or two-way fixed effect models, allow for dynamic lags and leads to the event of interest to be...

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...