In a factor-augmented regression, the forecast of a variable depends on a few factors estimated from a large number of predictors. But how does one determine the appropriate number of factors relevant for such a regression? Existing work has focused on criteria that can consistently estimate the...

We suggest a way to perform parsimonious instrumental variables estimation in the presence of many, and potentially weak, instruments. In contrast to standard methods, our approach yields consistent estimates when the set of instrumental variables complies with a factor structure. In this sense,...