Extracting business cycle fluctuations: what do time series filters really do?
AbstractVarious methods are available to extract the "business cycle component" of a given time series variable. These methods may be derived as solutions to frequency extraction or signal extraction problems and differ in both their handling of trends and noise and their assumptions about the ideal time-series properties of a business cycle component. The filters are frequently illustrated by application to white noise, but applications to other processes may have very different and possibly unintended effects. This paper examines several frequently used filters as they apply to a range of dynamic process specifications and derives some guidelines for the use of such techniques.
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Bibliographic InfoPaper provided by Federal Reserve Bank of New York in its series Staff Reports with number 289.
Date of creation: 2007
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-08 (All new papers)
- NEP-BEC-2007-08-08 (Business Economics)
- NEP-DGE-2007-08-08 (Dynamic General Equilibrium)
- NEP-ECM-2007-08-08 (Econometrics)
- NEP-MAC-2007-08-08 (Macroeconomics)
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