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Moving Average Detrending and the Analysis of Business Cycles

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  • Osborn, Denise R

Abstract

This study complements the previous analyses of the effects of different types of detrending, by considering moving average detrending which is widely used in business cycle analysis by official and quasi-official agencies. Such detrending is shown to render a wide range of processes stationary, including those with up to second-order deterministic and/or stochastic nonstationartiy. At the same time, however, the medium and long run properties of the disturbance process are profoundly altered. Applied to an '1' (1) process, the component at a period equal to the moving average length is enhanced, with potentially serious consequences for business cycle analysis. If the detrending is applied to an '1' (2) process, the long run component is emphasized and the resulting (stationary) series may appear to be nonstationary. Copyright 1995 by Blackwell Publishing Ltd

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Bibliographic Info

Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics & Statistics.

Volume (Year): 57 (1995)
Issue (Month): 4 (November)
Pages: 547-58

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Handle: RePEc:bla:obuest:v:57:y:1995:i:4:p:547-58

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Cited by:
  1. Massmann, Michael & Mitchell, James, 2003. "Reconsidering the evidence: Are Eurozone business cycles converging," ZEI Working Papers B 05-2003, ZEI - Center for European Integration Studies, University of Bonn.
  2. Guay, A & St-Amant, P, 1996. "Do Mechanical Filters Provide a Good Approximation of Business Cycles?," Technical Reports 78, Bank of Canada.
  3. Ulrich Woitek, 1998. "A Note on the Baxter-King Filter," Working Papers 9813, Business School - Economics, University of Glasgow.
  4. Alexandra Krystaloyianni & George Matysiak & Sotiris Tsolacos, 2004. "Forecasting UK Real Estate Cycle Phases With Leading Indicators: A Probit Approach," Real Estate & Planning Working Papers rep-wp2004-15, Henley Business School, Reading University.
  5. John T. Cuddington & Grant N�lle, 2013. "Variable Long-Term Trends in Mineral Prices: The Ongoing Tug-of-War between Exploration, Depletion, and Technological Change," Working Papers 2013-02, Colorado School of Mines, Division of Economics and Business.
  6. Chantal Dupasquier & Alain Guay & Pierre St-Amant, 1997. "A Comparison of Alternative Methodologies for Estimating Potential Output and the Output Gap," Working Papers 97-5, Bank of Canada.
  7. Alain GUAY & Pierre SAINT-AMANT, 2005. "Do the Hodrick-Prescott and Baxter-King Filters Provide a Good Approximation of Business Cycles?," Annales d'Economie et de Statistique, ENSAE, issue 77, pages 133-155.
  8. Javier Gómez Biscarri, 2002. "Dating Recessions from Industrial Production Indexes: An Analysis for Europe and the US," Faculty Working Papers 05/02, School of Economics and Business Administration, University of Navarra.
  9. M Artis, 2002. "Dating the Business Cycle in Britain," Centre for Growth and Business Cycle Research Discussion Paper Series 17, Economics, The Univeristy of Manchester.
  10. Andreas Blöchl & Gebhard Flaig, 2014. "The Hodrick-Prescott Filter with a Time-Varying Penalization Parameter. An Application for the Trend Estimation of Global Temperature," CESifo Working Paper Series 4577, CESifo Group Munich.
  11. Gebhard Flaig & Claudia Ploetscher, 2000. "Estimating the Output Gap Using Business Survey Data - A Bivariate Structural Time Series Model for the German Economy," CESifo Working Paper Series 233, CESifo Group Munich.
  12. Woitek, Ulrich, 2003. "Height cycles in the 18th and 19th centuries," Economics & Human Biology, Elsevier, vol. 1(2), pages 243-257, June.
  13. A'Hearn, Brian & Woitek, Ulrich, 2001. "More international evidence on the historical properties of business cycles," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 321-346, April.
  14. Sunder, Marco & Woitek, Ulrich, 2005. "Boom, bust, and the human body: Further evidence on the relationship between height and business cycles," Economics & Human Biology, Elsevier, vol. 3(3), pages 450-466, December.

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