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Locating change-points in Hodrick–Prescott trends with an application to US real GDP: A generalized unobserved components model approach

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  • Yoon, Gawon

Abstract

The trends estimated by the Hodrick–Prescott (HP) filter are smooth by design and it is not easy to pinpoint their change-points. In this study, we locate their change-points by formulating the HP filter as a generalized unobserved components model with error terms of mixtures of normal distributions. We apply the method to US real GDP for the 1947:1–2013:3 period and find that a sequence of mostly negative shocks, rather than a few extraordinary large ones, are responsible for the changes in the US real GDP trend.

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  • Yoon, Gawon, 2015. "Locating change-points in Hodrick–Prescott trends with an application to US real GDP: A generalized unobserved components model approach," Economic Modelling, Elsevier, vol. 45(C), pages 136-141.
    • Handle: RePEc:eee:ecmode:v:45:y:2015:i:c:p:136-141
    DOI: 10.1016/j.econmod.2014.10.014
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    References listed on IDEAS

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