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On Adjusting the H-P Filter for the Frequency of Observations

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Author Info

  • Uhlig, H.F.H.V.S.
  • Ravn, M.

    (Tilburg University, Center for Economic Research)

Abstract

This paper studies how the HP-Filter should be adjusted, when changing the frequency of observations. The usual choices in the literature are to adjust the smoothing parameter by multiplying it with either the square of the observation frequency ratios or simply with the observation frequency. In contrast, the paper recommends to adjust the filter parameter by multiplying it with the fourth power of the observation frequency ratios. Based on this suggestion, some well-known comparisons of business cycles moments across countries and time periods are recomputed. In particular, we overturn a finding by Backus and Kehoe (1992) on the historical changes in output volatility and return instead to older conventional wisdom (Baily, 1978, Lucas, 1977): based on the new HP-Filter adjustment rule, output volatility turns out to have decreased after the Second World War.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1997-50.

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Date of creation: 1997
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Handle: RePEc:dgr:kubcen:199750

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Web page: http://center.uvt.nl

Related research

Keywords: HP-Filter; frequency of observation; real business cycles; output volatility; pre-war business cycles;

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    • Lawrence J. Christiano & Terry J. Fitzgerald, 2003. "The Band Pass Filter," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, 05.
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  7. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
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  17. Sichel, Daniel E, 1993. "Business Cycle Asymmetry: A Deeper Look," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 224-36, April.
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  21. Ravn, Morten O. & Uhlig, Harald, 2001. "On Adjusting the HP-Filter for the Frequency of Observations," CEPR Discussion Papers 2858, C.E.P.R. Discussion Papers.
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  23. Baxter, Marianne, 1994. "Real exchange rates and real interest differentials: Have we missed the business-cycle relationship?," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 5-37, February.
  24. Peter Brandner & Klaus Neusser, 1992. "Business cycles in open economies: Stylized facts for Austria and Germany," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 128(1), pages 67-87, March.
  25. John Hassler & Petter Lundvik & Torsten Persson & Paul Soderlind, 1992. "The Swedish business cycle: stylized facts over 130 years," Discussion Paper / Institute for Empirical Macroeconomics 63, Federal Reserve Bank of Minneapolis.
  26. Blackburn, Keith & Ravn, Morten O, 1992. "Business Cycles in the United Kingdom: Facts and Fictions," Economica, London School of Economics and Political Science, vol. 59(236), pages 383-401, November.
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