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- Publisher
- Taylor & Francis
- Copyright
- © American Statistical Association
- ISSN
- 1537-2707
- eISSN
- 0735-0015
- DOI
- 10.1198/073500106000000585
- Publisher site
- See Article on Publisher Site
Abstract
Bai and Ng proposed a consistent estimator for the number of static factors in a large N and T approximate factor model. This article shows how the Bai–Ng estimator can be modified to consistently estimate the number of dynamic factors in a restricted dynamic factor model. The modification is straightforward: The standard Bai–Ng estimator is applied to residuals obtained by projecting the observed data onto lagged values of principal-components estimates of the static factors.
Journal
Journal of Business & Economic Statistics – Taylor & Francis
Published: Jan 1, 2007
Keywords: Approximate factor model; Bai–Ng estimator; Dynamic factor model