Robust Estimation and Inference in Panels with Interactive Fixed Effects

Timothy B. Armstrong, Martin Weidner and Andrei Zeleneev

Journal of Political Economy, 2026, vol. 134, issue 8, 2223 - 2261

Abstract: We consider estimation and inference for a regression coefficient in panels with interactive fixed effects (i.e., a factor structure). We show that previously developed estimators and confidence intervals (CIs) are heavily biased and size distorted when some of the factors are weak. Combining the theory of minimax linear estimation with a nuclear norm bound on the error of an initial estimate of the interactive effects, we propose estimators with improved rates of convergence and uniformly valid CIs allowing for weak factors. Our method substantially outperforms conventional approaches when factors are weak, with little cost to estimation error when factors are strong.

Date: 2026
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