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Classical vs wavelet-based filters Comparative study and application to business cycle

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  • Ibrahim Ahamada

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Philippe Jolivaldt

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this article, we compare the performance of Hodrickk-Prescott and Baxter-King filters with a method of filtering based on the multi-resolution properties of wavelets. We show that overall the three methods remain comparable if the theoretical cyclical component is defined in the usual waveband, ranging between six and thirty two quarters. However the approach based on wavelets provides information about the business cycle, for example, its stability over time which the other two filters do not provide. Based on Monte Carlo simulation experiments, our method applied to the American GDP using growth rate data shows that the estimate of the business cycle component is richer in information than that deduced from the level of GDP and includes additional information about the post 1980 period of great moderation.

Suggested Citation

  • Ibrahim Ahamada & Philippe Jolivaldt, 2010. "Classical vs wavelet-based filters Comparative study and application to business cycle," Post-Print halshs-00476022, HAL.
    • Handle: RePEc:hal:journl:halshs-00476022
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00476022
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    References listed on IDEAS

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    1. Christoph Schleicher, 2002. "An Introduction to Wavelets for Economists," Staff Working Papers 02-3, Bank of Canada.
    2. repec:zbw:bofrdp:2005_001 is not listed on IDEAS
    3. 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.
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    Cited by:

    1. Benhmad, François, 2013. "Dynamic cyclical comovements between oil prices and US GDP: A wavelet perspective," Energy Policy, Elsevier, vol. 57(C), pages 141-151.

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