This study considers the instrumental variable estimation of factor models. Specifically, we investigate the weak instruments problem, which is not well investigated in the literature, in detail. We show that the signal-to-noise ratios, which are defined by the variance ratios of the common...

This paper extends the transformed maximum likelihood approach for estimation of dynamic panel data models by Hsiao, Pesaran, and Tahmiscioglu (2002) to the case where the errors are crosssectionally heteroskedastic. This extension is not trivial due to the incidental parameters problem that...

In this paper, we derive the asymptotic properties of the system GMM estimator in dynamic panel data models with individual and time effects when both N and T, the dimensions of cross section and time series, are large. We first show that the two-step level GMM estimator with an optimal...

This paper proposes the transformed maximum likelihood estimator for short dynamic panel data models with interactive fixed effects, and provides an extension of Hsiao et al. (2002) that allows for a multifactor error structure. This is an important extension since it retains the advantages of...

This paper proposes the transformed maximum likelihood estimator for short dynamic panel data models with interactive fixed effects, and provides an extension of Hsiao et al. (2002) that allows for a multifactor error structure. This is an important extension since it retains the advantages of...