Classical vs wavelet-based filters Comparative study and application to business cycle
AbstractIn this article, we compare the performance of Hodrickk-Prescott and Baxter-King filters with a method of filtering based on the multi-resolution properties of wavelets. We show that overall the three methods remain comparable if the theoretical cyclical component is defined in the usual waveband, ranging between six and thirty two quarters. However the approach based on wavelets provides information about the business cycle, for example, its stability over time which the other two filters do not provide. Based on Monte Carlo simulation experiments, our method applied to the American GDP using growth rate data shows that the estimate of the business cycle component is richer in information than that deduced from the level of GDP and includes additional information about the post 1980 period of great moderation.
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Date of creation: Mar 2010
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Filters; HP; BK; wavelets; Monte Carlo Simulation break; business cycles.;
Other versions of this item:
- Ibrahim Ahamada & Philippe Jolivaldt, 2010. "Classical vs wavelet-based filters Comparative study and application to business cycle," Documents de travail du Centre d'Economie de la Sorbonne 10027, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-02 (All new papers)
- NEP-BEC-2010-05-02 (Business Economics)
- NEP-CMP-2010-05-02 (Computational Economics)
- NEP-ECM-2010-05-02 (Econometrics)
- NEP-ETS-2010-05-02 (Econometric Time Series)
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