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To Boost or Not to Boost? That is the Question

Author

Listed:
  • Ye Lu
  • Adrian Pagan

Abstract

Phillips and Shi (2021) have argued that there may be some leakage from the estimate of the permanent component to what is meant to be the transitory component when one uses the Hodrick-Prescott filter. They argue that this can be eliminated by boosting the filter. We show that there is no leakage from the filter per se, so boosting is not needed for that. They also argue that there are DGP's for the components for which the boosted filter tracks these more accurately. We show that there are other plausible DGP's where the boosted filter tracks less accurately, and what is crucial to tracking performance is how important permanent shocks are to growth in the series being filtered. In particular, the DGP's used in Phillips and Shi (2021) have a very high contribution from permanent shocks.

Suggested Citation

  • Ye Lu & Adrian Pagan, 2023. "To Boost or Not to Boost? That is the Question," CAMA Working Papers 2023-12, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2023-12
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    File URL: https://crawford.anu.edu.au/sites/default/files/2025-01/12_2023_lu_pagan_0.pdf
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    Cited by:

    1. Ziwei Mei & Peter C. B. Phillips & Zhentao Shi, 2024. "The boosted Hodrick‐Prescott filter is more general than you might think," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 39(7), pages 1260-1281, November.

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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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