This paper shows consistency of a two step estimation of the factors in a dynamic approximate factor model when the panel of time series is large ( large). In the first step, the parameters of the model are estimated from an OLS on principal components. In the second step, the factors are...

This paper shows consistency of a two step estimation of the factors in a dynamic approximate factor model when the panel of time series is large ( large). In the first step, the parameters of the model are estimated from an OLS on principal components. In the second step, the factors are...