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Kernel-based Time-Varying IV estimation: handle with care

Lucchetti, Riccardo and Valentini, Francesco (2021): Kernel-based Time-Varying IV estimation: handle with care.

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Giraitis, Kapetanios, and Marcellino (Journal of Econometrics, 2020) proposed a kernel-based time-varying coefficients IV estimator. By using entirely different code, We broadly replicate the simulation results and the empirical application on the Phillips Curve but we note that a small coding mistake might have affected some of the reported results. Further, we extend the results by using a different sample and many kernel functions; we find that the estimator is remarkably robust across a wide range of smoothing choices, but the effect of outliers may be less obvious than expected.

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