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Improving the reliability of real-time Hodrick-Prescott filtering using survey forecasts

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  • Jaqueson K. Galimberti
  • Marcelo L. Moura

Abstract

Incorporating survey forecasts to a forecast-augmented Hodrick-Prescott filter, we evidence a considerable improvement to the reliability of US output-gap estimation in realtime. Odds of extracting wrong signals of output-gap estimates are found to reduce by almost a half, and the magnitude of revisions to these estimates accounts to only three fifths of the output-gap average size, usually an one-by-one ratio. We further analyze how this end-of-sample uncertainty evolves as time goes on and observations accumulate, showing that a 90% rate of correct assessments of the output-gap sign can be attained with five quarters of delay using survey forecasts.

Suggested Citation

  • Jaqueson K. Galimberti & Marcelo L. Moura, 2011. "Improving the reliability of real-time Hodrick-Prescott filtering using survey forecasts," Centre for Growth and Business Cycle Research Discussion Paper Series 159, Economics, The University of Manchester.
    • Handle: RePEc:man:cgbcrp:159
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    1. Jaqueson K. Galimberti & Nicolas Suhadolnik & Sergio Silva, 2017. "Cowboying Stock Market Herds with Robot Traders," Computational Economics, Springer;Society for Computational Economics, vol. 50(3), pages 393-423, October.
    2. Galimberti, Jaqueson K. & Moura, Marcelo L., 2013. "Taylor rules and exchange rate predictability in emerging economies," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 1008-1031.

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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