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Trends and Cycles in Real-Time

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  • Rómulo A. Chumacero
  • Francisco A. Gallego

Abstract

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.

Suggested Citation

  • Rómulo A. Chumacero & Francisco A. Gallego, 2001. "Trends and Cycles in Real-Time," Working Papers Central Bank of Chile 130, Central Bank of Chile.
  • Handle: RePEc:chb:bcchwp:130
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    References listed on IDEAS

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    1. Raimundo Soto, 2002. "Ajuste Estacional e Integración en Variables Macroeconómicas," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 39(116), pages 135-155.
    2. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    3. J. J. Reeves & C. A. Blyth & C. M. Triggs & J. P. Small, "undated". "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.
    4. Athanasios Orphanides & Simon van Norden, 2002. "The Unreliability of Output-Gap Estimates in Real Time," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 569-583, November.
    5. Ehlgen, Jurgen, 1998. "Distortionary effects of the optimal Hodrick-Prescott filter," Economics Letters, Elsevier, vol. 61(3), pages 345-349, December.
    6. Stark, Tom & Croushore, Dean, 2002. "Forecasting with a real-time data set for macroeconomists," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 507-531, December.
    7. Croushore, Dean & Stark, Tom, 2001. "A real-time data set for macroeconomists," Journal of Econometrics, Elsevier, vol. 105(1), pages 111-130, November.
    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 127-152, April.
    9. 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.
    10. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    11. 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.
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    Citations

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    Cited by:

    1. Rodrigo Fuentes S. & Fabián Gredig U. & Mauricio Larraín E., 2008. "The output Gap in chile: Measurement and Evaluation," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(2), pages 7-30, August.
    2. Kishor, N. Kundan, 2011. "Data revisions in India: Implications for monetary policy," Journal of Asian Economics, Elsevier, vol. 22(2), pages 164-173, April.
    3. Michael Pedersen, 2013. "Extracting GDP signals from the monthly indicator of economic activity: Evidence from Chilean real-time data," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2013(1), pages 1-16.
    4. Camila Figueroa & Pablo García, 2017. "Desafíos de la Política Monetaria Sistemática," Economic Policy Papers Central Bank of Chile 64, Central Bank of Chile.
    5. Pablo Pincheira & Hernán Rubio, 2010. "The Low Predictive Power of Simple Phillips Curves in Chile: A Real-Time Evaluation," Working Papers Central Bank of Chile 559, Central Bank of Chile.
    6. Gabriela Contreras M. & Pablo García S., 2002. "Estimating Gaps and Trends for the Chilean Economy," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 5(2), pages 37-55, August.
    7. Rodrigo Fuentes & Fabián Gredig & Mauricio Larraín, 2007. "Estimating the Output Gap for Chile," Working Papers Central Bank of Chile 455, Central Bank of Chile.
    8. Carlos A. Medel V. & Michael Pedersen, 2010. "Incertidumbre en las Series Desestacionalizadas de Actividad y Demanda en Chile," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 13(1), pages 63-72, April.
    9. Kishor, N. Kundan, 2009. "Data Revisions in India and its Implications for Monetary Policy," MPRA Paper 16099, University Library of Munich, Germany.
    10. Rodrigo Fuentes & Fabián Gredig & Mauricio Larraín, 2008. "La brecha de producto en Chile: medición y evaluación," Investigación Conjunta-Joint Research,in: Centro de Estudios Monetarios Latinoamericanos (CEMLA) (ed.), Estimación y Uso de Variables no Observables en la Región, edition 1, volume 1, chapter 3, pages 69-102 Centro de Estudios Monetarios Latinoamericanos, CEMLA.

    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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