A spectral analysis of New Zealand output gaps using Fourier and wavelet techniques
AbstractThis paper uses frequency domain techniques to illustrate the properties of various measures of New Zealand's output gap. Measures of the output gap are estimated using a number of different methods: a Structural VAR model, a multivariate unobserved components model, the Hodrick-Prescott filter, a multivariate time series filter, and a linear time trend filter. Spectral densities, calculated using the Fourier transform, highlight a number of important differences in the cyclical properties of the various output gap measures. However, the Fourier transform requires time series to be (weakly) stationary. This may be an unreasonable assumption for New Zealand data given our recent economic history. Accordingly, the paper also uses time-dependant spectra, calculated using wavelet analysis, to further illustrate the cyclical characteristics of the different techniques used to estimate the output gap.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Discussion Paper Series with number DP2000/06.
Date of creation: Jun 2000
Date of revision:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
- Timothy Cogley & James M. Nason, 1993.
"Effects of the Hodrick-Prescott filter on trend and difference stationary time series: implications for business cycle research,"
Working Papers in Applied Economic Theory
93-01, Federal Reserve Bank of San Francisco.
- Cogley, Timothy & Nason, James M., 1995. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 253-278.
- Robert J. Hodrick & Edward Prescott, 1981.
"Post-War U.S. Business Cycles: An Empirical Investigation,"
451, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
- Ramsey James B. & Lampart Camille, 1998. "The Decomposition of Economic Relationships by Time Scale Using Wavelets: Expenditure and Income," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 3(1), pages 1-22, April.
- Jane T. Haltmaier, 1996. "Inflation-adjusted potential output," International Finance Discussion Papers 561, Board of Governors of the Federal Reserve System (U.S.).
- Paul Conway & Ben Hunt, 1997. "Estimating potential output: a semi-structural approach," Reserve Bank of New Zealand Discussion Paper Series G97/9, Reserve Bank of New Zealand.
- Allan W. Gregory & Gregor W. Smith, 1995.
"Business Cycle Theory and Econometrics,"
1254, Queen's University, Department of Economics.
- Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
- Cochrane, John H, 1994. "Permanent and Transitory Components of GNP and Stock Prices," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 241-65, February.
- Marianne Baxter & Robert G. King, 1999.
"Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series,"
The Review of Economics and Statistics,
MIT Press, vol. 81(4), pages 575-593, November.
- Tom Doan, . "BKFILTER: RATS procedure to implement band pass filter using Baxter-King method," Statistical Software Components RTS00026, Boston College Department of Economics.
- Marianne Baxter & Robert G. King, 1995. "Measuring Business Cycles Approximate Band-Pass Filters for Economic Time Series," NBER Working Papers 5022, National Bureau of Economic Research, Inc.
- Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 231-47, July-Sept.
- Canova, Fabio, 1998.
"Detrending and business cycle facts,"
Journal of Monetary Economics,
Elsevier, vol. 41(3), pages 475-512, May.
- Chantal Dupasquier & Alain Guay & Pierre St-Amant, 1997. "A Comparison of Alternative Methodologies for Estimating Potential Output and the Output Gap," Working Papers 97-5, Bank of Canada.
- Moisa, Altar & Necula, Ciprian & Bobeica, Gabriel, 2010. "Estimating Potential GDP for the Romanian Economy. An Eclectic Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 5-25, September.
- Patrick Crowley, 2005.
"An intuitive guide to wavelets for economists,"
- Castro, Tomás del Barrio & Rodrigues, Paulo M.M. & Taylor, A.M. Robert, 2013.
"The Impact Of Persistent Cycles On Zero Frequency Unit Root Tests,"
Cambridge University Press, vol. 29(06), pages 1289-1313, December.
- Tomás del Barrio Castro & Paulo M.M. Rodrigues & A. M. Robert Taylor, 2011. "The Impact of Persistent Cycles on Zero Frequency Unit Root Tests," Working Papers w201124, Banco de Portugal, Economics and Research Department.
- Victor Gaiduch & Benjamin Hunt, 2000. "Inflation targeting under potential output uncertainty," Reserve Bank of New Zealand Discussion Paper Series DP2000/08, Reserve Bank of New Zealand.
- Moisa Altar & Ciprian Necula & Gabriel Bobeica, 2009. "A Robust Assessment of the Romanian Business Cycle," Advances in Economic and Financial Research - DOFIN Working Paper Series 28, Bucharest University of Economics, Center for Advanced Research in Finance and Banking - CARFIB.
- Iris Claus, 2000. "Is the output gap a useful indicator of inflation?," Reserve Bank of New Zealand Discussion Paper Series DP2000/05, Reserve Bank of New Zealand.
- Christoph Schleicher, 2002. "An Introduction to Wavelets for Economists," Working Papers 02-3, Bank of Canada.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Reserve Bank of New Zealand Knowledge Centre).
If references are entirely missing, you can add them using this form.