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Moving Average Detrending and the Analysis of Business Cycles

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  • Osborn, Denise R

Abstract

This study complements the previous analyses of the effects of different types of detrending, by considering moving average detrending which is widely used in business cycle analysis by official and quasi-official agencies. Such detrending is shown to render a wide range of processes stationary, including those with up to second-order deterministic and/or stochastic nonstationartiy. At the same time, however, the medium and long run properties of the disturbance process are profoundly altered. Applied to an '1' (1) process, the component at a period equal to the moving average length is enhanced, with potentially serious consequences for business cycle analysis. If the detrending is applied to an '1' (2) process, the long run component is emphasized and the resulting (stationary) series may appear to be nonstationary. Copyright 1995 by Blackwell Publishing Ltd

Suggested Citation

  • Osborn, Denise R, 1995. "Moving Average Detrending and the Analysis of Business Cycles," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(4), pages 547-558, November.
  • Handle: RePEc:bla:obuest:v:57:y:1995:i:4:p:547-58
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    References listed on IDEAS

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    Cited by:

    1. Woitek, Ulrich, 2003. "Height cycles in the 18th and 19th centuries," Economics & Human Biology, Elsevier, pages 243-257.
    2. Massmann, Michael & Mitchell, James, 2003. "Reconsidering the evidence: Are Eurozone business cycles converging," ZEI Working Papers B 05-2003, University of Bonn, ZEI - Center for European Integration Studies.
    3. Cuddington, John T. & Nülle, Grant, 2014. "Variable long-term trends in mineral prices: The ongoing tug-of-war between exploration, depletion, and technological change," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 224-252.
    4. Andreas Blöchl & Gebhard Flaig, 2014. "The Hodrick-Prescott Filter with a Time-Varying Penalization Parameter. An Application for the Trend Estimation of Global Temperature," CESifo Working Paper Series 4577, CESifo Group Munich.
    5. Pablo Mejía-Reyes, 1999. "Classical business cycles in Latin America: Turning points, asimmetries and international synchronisation," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 14(2), pages 265-297.
    6. Sunder, Marco & Woitek, Ulrich, 2005. "Boom, bust, and the human body: Further evidence on the relationship between height and business cycles," Economics & Human Biology, Elsevier, vol. 3(3), pages 450-466, December.
    7. Gebhard Flaig & Claudia Plötscher, 2000. "Estimating the Output Gap Using Business Survey Data - A Bivariate Structural Time Series Model for the German Economy," CESifo Working Paper Series 233, CESifo Group Munich.
    8. Ulrich Woitek, 1998. "A Note on the Baxter-King Filter," Working Papers 9813, Business School - Economics, University of Glasgow.
    9. Michael Artis, 2002. "Dating the Business Cycle in Britain," National Institute Economic Review, National Institute of Economic and Social Research, vol. 182(1), pages 90-95, October.
    10. Guay, A & St-Amant, P, 1996. "Do Mechanical Filters Provide a Good Approximation of Business Cycles?," Working Papers-Department of Finance Canada 1996-2, Department of Finance Canada.
    11. Alain Guay & Pierre Saint-Amant, 2005. "Do the Hodrick-Prescott and Baxter-King Filters Provide a Good Approximation of Business Cycles?," Annals of Economics and Statistics, GENES, pages 133-155.
    12. Javier Gómez Biscarri, 2002. "Dating Recessions from Industrial Production Indexes: An Analysis for Europe and the US," Faculty Working Papers 05/02, School of Economics and Business Administration, University of Navarra.
    13. Alexandra Krystaloyianni & George Matysiak & Sotiris Tsolacos, 2004. "Forecasting UK Real Estate Cycle Phases With Leading Indicators: A Probit Approach," Real Estate & Planning Working Papers rep-wp2004-15, Henley Business School, Reading University.
    14. A'Hearn, Brian & Woitek, Ulrich, 2001. "More international evidence on the historical properties of business cycles," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 321-346, April.
    15. Eduardo Loría & Emmanuel Salas, 2014. "Ciclos, crecimiento económico y crisis en México, 1980.1-2013.4," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 29(2), pages 131-161.
    16. Chantal Dupasquier & Alain Guay & Pierre St-Amant, 1997. "A Comparison of Alternative Methodologies for Estimating Potential Output and the Output Gap," Staff Working Papers 97-5, Bank of Canada.

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