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Trends and Cycles in Real-Time

  • Rómulo A. Chumacero
  • Francisco A. Gallego

This paper compares the results of applying several detrending methods to the Chilean monthly economic activity index (IMACEC) that arise from using real-time data sets. We show that data revisions are extremely important and that they can lead to systematically inconsistent estimates of the trend component. Furthermore, most of the filters commonly used to detrend time series in practice, are highly unstable and unreliable for end-of-sample estimation.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 130.

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Date of creation: Nov 2001
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Handle: RePEc:chb:bcchwp:130
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  1. 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.
  2. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  3. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  4. Tom Stark & Dean Croushore, 2001. "Forecasting with a real-time data set for macroeconomists," Working Papers 01-10, Federal Reserve Bank of Philadelphia.
  5. Athanasios Orphanides & Simon Van_Norden, 2000. "The Reliability of Output Gap Estimates in Real Time," Econometric Society World Congress 2000 Contributed Papers 0768, Econometric Society.
  6. St-Amant, P. & van Norden, S., 1997. "Measurement of the Output Gap: A Discussion of Recent Research at the Bank of Canada," Technical Reports 79, Bank of Canada.
  7. Raimundo Soto, 2000. "Ajuste Estacional e Integración en Variables Macroeconómicas," Working Papers Central Bank of Chile 73, Central Bank of Chile.
  8. Findley, David F, et al, 1998. "New Capabilities and Methods of the X-12-ARIMA Seasonal-Adjustment Program," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 127-52, April.
  9. Ehlgen, Jurgen, 1998. "Distortionary effects of the optimal Hodrick-Prescott filter," Economics Letters, Elsevier, vol. 61(3), pages 345-349, December.
  10. Dean Croushore & Tom Stark, 1999. "A real-time data set for macroeconomists," Working Papers 99-4, Federal Reserve Bank of Philadelphia.
  11. J. J. Reeves & C. A. Blyth & C. M. Triggs & J. P. Small, . "The Hodrick-Prescott Filter, a Generalisation, and a New Procedure for Extracting an Empirical Cycle from a Series," Reports 9602, University of Auckland, Department of Economics.
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