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Detrending and the Distributional Properties of U.S. Output Time Series

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Author Info

  • Giorgio Fagiolo

    ()
    (Sant''Anna School of Advanced Studies, Pisa (Italy).)

  • Mauro Napoletano

    ()
    (OFCE, Sophia-Antipolis, (France), and Sant''Anna School of Advanced Studies, Pisa (Italy).)

  • Marco Piazza

    ()
    (Sant''Anna School of Advanced Studies, Pisa (Italy).)

  • Andrea Roventini

    ()
    (University of Verona (Italy), and Sant''Anna School of Advanced Studies, Pisa (Italy).)

Abstract

We study the impact of alternative detrending techniques on the distributional properties of U.S. output time series. We detrend GDP and industrial production time series employing first-differencing, Hodrick-Prescott and bandpass filters. We show that the resulting distributions can be approximated by symmetric Exponential-Power densities, with tails fatter than those of a Gaussian. We also employ frequency-band decomposition procedures finding that fat tails occur more likely at high and medium business-cycle frequencies. These results confirm the robustness of the fat-tail property of detrended output time-series distributions and suggest that business-cycle models should take into account this empirical regularity.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 29 (2009)
Issue (Month): 4 ()
Pages: 3155-3161

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Handle: RePEc:ebl:ecbull:eb-09-00650

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Keywords: statistical distributions; detrending; HP filter; bandpass filter; normality; fat tails; time series; Exponential-Power density; business cycles dynamics.;

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References

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  1. Fabio Canova, 1994. "Does detrending matter for the determination of the reference cycle and the selection of turning points?," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 113, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 1995.
  2. Carolina Castaldi & Giovanni Dosi, 2009. "The patterns of output growth of firms and countries: Scale invariances and scale specificities," Empirical Economics, Springer, Springer, vol. 37(3), pages 475-495, December.
  3. Victor Zarnowitz, 1992. "Business Cycles: Theory, History, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number zarn92-1.
  4. Simona Delle Chiaie, 2009. "The sensitivity of DSGE models’ results to data detrending," Working Papers, Oesterreichische Nationalbank (Austrian Central Bank) 157, Oesterreichische Nationalbank (Austrian Central Bank).
  5. James H. Stock & Mark W. Watson, 1998. "Business Cycle Fluctuations in U.S. Macroeconomic Time Series," NBER Working Papers 6528, National Bureau of Economic Research, Inc.
  6. Mauro Napoletano & Jackie Krafft & Andrea Roventini, 2006. "Are output growth-rate distributions fat-tailed? Some evidence from OECD countries," Sciences Po publications, Sciences Po 36, Sciences Po.
  7. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
  8. Lawrence J. Christiano & Terry J. Fitzgerald, 1999. "The Band Pass Filter," NBER Working Papers 7257, National Bureau of Economic Research, Inc.
  9. Giulio Bottazzi & Angelo Secchi, 2006. "Maximum Likelihood Estimation of the Symmetric and Asymmetric Exponential Power Distribution," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2006/19, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  10. Giulio Bottazzi & Angelo Secchi, 2003. "Sectoral Specifities in the Dynamics of U.S. Manufacturing Firms," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2003/18, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  11. Canova, Fabio, 1998. "Detrending and business cycle facts," Journal of Monetary Economics, Elsevier, Elsevier, vol. 41(3), pages 475-512, May.
  12. Bottazzi, Giulio & Secchi, Angelo, 2003. "Why are distributions of firm growth rates tent-shaped?," Economics Letters, Elsevier, Elsevier, vol. 80(3), pages 415-420, September.
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Cited by:
  1. Guido Ascari & Giorgio Fagiolo & Andrea Roventini, 2012. "Fat-Tail Distributions and Business-Cycle Models," Quaderni di Dipartimento, University of Pavia, Department of Economics and Quantitative Methods 157, University of Pavia, Department of Economics and Quantitative Methods.
  2. Giulio Bottazzi & Marco Duenas, 2012. "The Evolution of the Business Cycles and Growth Rates Distributions," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2012/22, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  3. De Grauwe, Paul, 2012. "Booms and busts in economic activity: A behavioral explanation," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 83(3), pages 484-501.

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