A Complete Model-Based Interpretation of the Hodrick-Prescott Filter: Spuriousness Reconsidered
The Hodrick-Prescott filter applied to seasonally adjusted series has become a paradigm for business-cycle estimation at many economic agencies and institutions. We show that the filter can be obtained from MMSE estimation of the components in an unobserved component model, where the original series is decomposed into (long-term) trend, cyclical, seasonal, and (highlytransitory) irregular components. The component models are sensible and combine desirable “ad-hoc” features with series-dependent features that guarantee consistency with the data. The model-based framework provides improvements having to do with the precision of end-point estimation and the stability of the cyclical signal.
|Date of creation:||Mar 2002|
|Contact details of provider:|| Web page: http://www.bde.es/|
More information through EDIRC
References listed on IDEAS
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.:
- David A. Pierce, 1978. "Seasonal adjustment when both deterministic and stochastic seasonality are present," Special Studies Papers 107, Board of Governors of the Federal Reserve System (U.S.).
- Agustín Maravall, 1996. "Unobserved Components in Economic Time Series," Working Papers 9609, Banco de España;Working Papers Homepage.
- Maravall, Agustin, 1985. "On Structural Time Series Models and the Characterization of Components," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 350-355, October.
- 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 231-247, July-Sept.
- David A. Pierce, 1978. "Seasonal Adjustment When Both Deterministic and Stochastic Seasonality Are Present," NBER Chapters,in: Seasonal Analysis of Economic Time Series, pages 242-280 National Bureau of Economic Research, Inc.
- Pierce, David A., 1980. "Data revisions with moving average seasonal adjustment procedures," Journal of Econometrics, Elsevier, vol. 14(1), pages 95-114, September.
- Harvey, Andrew, 1997. "Trends, Cycles and Autoregressions," Economic Journal, Royal Economic Society, vol. 107(440), pages 192-201, January.
- 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.
- 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.
- Gomez, Victor, 2001. "The Use of Butterworth Filters for Trend and Cycle Estimation in Economic Time Series," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(3), pages 365-373, July.
- Nerlove, Marc & Grether, David M. & Carvalho, José L., 1979. "Analysis of Economic Time Series," Elsevier Monographs, Elsevier, edition 1, number 9780125157506 edited by Shell, Karl.
- Víctor Gómez & Pilar Bengoechea, 2000. "The quarterly national accounts trend-cycle filter versus model-based filters," Spanish Economic Review, Springer;Spanish Economic Association, vol. 2(1), pages 29-48.
- King, Robert G. & Rebelo, Sergio T., 1993. "Low frequency filtering and real business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 207-231.
- King, R.G. & Rebelo, S.T., 1989. "Low Frequency Filtering And Real Business Cycles," RCER Working Papers 205, University of Rochester - Center for Economic Research (RCER).
- Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
- Finn E. Kydland & Edward C. Prescott, 1982. "Executable program for "Time to Build and Aggregate Fluctuations"," QM&RBC Codes 4, Quantitative Macroeconomics & Real Business Cycles.
- Finn E. Kydland & Edward C. Prescott, 1982. "Web interface for "Time to Build and Aggregate Fluctuations"," QM&RBC Codes 4a, Quantitative Macroeconomics & Real Business Cycles.
- Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers 152, OECD Publishing.
- Gomez, Victor, 1999. "Three Equivalent Methods for Filtering Finite Nonstationary Time Series," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 109-116, January.
- Agustín Maravall & Ana del Río, 2001. "Time Aggregation and the Hodrick-Prescott Filter," Working Papers 0108, Banco de España;Working Papers Homepage.
- Regina Kaiser & Agustín Maravall, 1999. "Estimation of the business cycle: A modified Hodrick-Prescott filter," Spanish Economic Review, Springer;Spanish Economic Association, vol. 1(2), pages 175-206.
- Regina Kaiser & Agustín Maravall, 1999. "Estimation of the Business Cycle: a Modified Hodrick-Prescott Filter," Working Papers 9912, Banco de España;Working Papers Homepage.