Agustín Maravall () (Banco de España) Ana del Río () (Banco de España)
Abstract
Maravall and del Río (2001), analized the time aggregation properties of the Hodrick-Prescott (HP) filter, which decomposes a time series into trend and cycle, for the case of annual, quarterly, and monthly data, and showed that aggregation of the disaggregate component cannot be obtained as the exact result from direct application of an HP filter to the aggregate series. The present paper shows how, using several criteria, one can find HP decompositions for different levels of aggregation that provide similar results. We use as the main criterion for aggregation the preservation of the period associated with the frequency for which the filter gain is ½; this criterion is intuitive and easy to apply. It is shown that the Ravn and Uhlig (2002) empirical rule turns out to be a first-order approximation to our criterion, and that alternative —more complex— criteria yield similar results. Moreover, the values of the parameter λ of the HP filter, that provide results that are approximately consistent under aggregation, are considerably robust with respect to the ARIMA model of the series. Aggregation is seen to work better for the case of temporal aggregation than for systematic sampling. Still a word of caution is made concerning the desirability of exact aggregation consistency. The paper concludes with a clarification having to do with the questionable spuriousness of the cycles obtained with HP filter.
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Find related papers by JEL classification: C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Rafael Domenech & Javier Andres & Antonio Fatas, 2006.
"The Stabilizing Role of Government Size,"
Working Papers
0603, International Economics Institute, University of Valencia, revised Jan 2007.
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