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Filter-Design and Model-Based Analysis of Economic Cycles

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Abstract

Two possibilities of analysis of economic cycles are studied in this document. Firstly, filter-design approaches consisting of the extraction of the information content of certain signals between two specific frequencies, as well as below or above certain frequencies. Secondly, model-based approaches, in which the specific properties of cycles are left to automatic estimation procedures in most cases. This document highlights and takes advantage of the relation between both approaches. In particular, the cycle is defined as a given frequency band as is typical of the filter-design literature, but the information is effectively extracted by a model-based approach. The procedure is shown working in practice on two typical examples.

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  • Diego J. Pedregal, 2003. "Filter-Design and Model-Based Analysis of Economic Cycles," Economic Working Papers at Centro de Estudios Andaluces E2003/13, Centro de Estudios Andaluces.
  • Handle: RePEc:cea:doctra:e2003_13
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    File URL: http://public.centrodeestudiosandaluces.es/pdfs/E200313.pdf
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    1. 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.
    2. Andrew C. Harvey & Thomas M. Trimbur, 2003. "General Model-Based Filters for Extracting Cycles and Trends in Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 244-255, May.
    3. 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.
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    Keywords

    Kalman Filter; Fixed Interval Smoother; Frequency Domain; Unobserved Components Models; State Space models.;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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