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Alternative Detrending Procedures for Macroeconomic Time Series

Author

Listed:
  • Allwood, J.
  • Sheperd, D.

Abstract

In this paper we examine the alternative detrending methods used to identify the stylised facts of the business cycle and develop a simple smoothing procedure that can be used to estimate the asymmetric cycles digested by an important class of macroeconomic models. To illustrate the properties of the asymmetric smoothing procedure, we use it to estimate the trend and cyclical components of real GDP and unemployment in the United States and compare the results with those obtained from the Hodrick-Prescott filter, linear detrending and first differencing. Our results indicate that the choice of an appropriate detrending procedure requires careful consideration of the frequency properties of the primary data and any prior restrictions suggested by economic theory.

Suggested Citation

  • Allwood, J. & Sheperd, D., 1999. "Alternative Detrending Procedures for Macroeconomic Time Series," Department of Economics - Working Papers Series 698, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:698
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    More about this item

    Keywords

    BUSINESS CYCLES ; TIME SERIES ; ECONOMETRICS;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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