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

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

Abstract

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Instrumental variables, Time-varying parameters, Hausman test, Phillips curve
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C14 - Semiparametric and Nonparametric Methods: General; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C26 - Instrumental Variables (IV) Estimation; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation

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