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Estimating the Smoothing Parameter in the So-Called Hodrick-Prescott Filter

  • Schlicht, Ekkehart

This note gives a fairly complete statistical description of the Hodrick-Prescott Filter (1997), originally proposed by Leser (1961). It builds on an approach to seasonal adjustment suggested by Leser (1963) and Schlicht (1981, 1984). A moments estimator for the smoothing parameter is proposed that is asymptotically equivalent to the maximum-likelihood estimator, has a straightforward intuitive interpretation and is more appropriate for short series than the maximum-likelihood estimator. The method is illustrated by an application and several simulations.

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Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 304.

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Date of creation: Feb 2004
Date of revision:
Handle: RePEc:lmu:muenec:304
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  1. repec:dar:ddpeco:38058 is not listed on IDEAS
  2. Schlicht, Ekkehart & Ludsteck, Johannes, 2006. "Variance Estimation in a Random Coefficients Model," Discussion Papers in Economics 904, University of Munich, Department of Economics.
  3. repec:dar:ddpeco:39247 is not listed on IDEAS
  4. Schlicht, Ekkehart, 1982. "Seasonal Adjustment in a Stochastic Model," Darmstadt Discussion Papers in Economics 25, Darmstadt University of Technology, Department of Law and Economics.
  5. 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.
  6. Schlicht, Ekkehart & Pauly, Ralf, 1983. "Descriptive Seasonal Adjustment by Minimizing Perturbations," Munich Reprints in Economics 3346, University of Munich, Department of Economics.
  7. Schlicht, Ekkehart, . "Isolation and Aggregation in Economics," Monographs in Economics, University of Munich, Department of Economics, number 3, October.
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