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OECD Composite Leading Indicators for G7 Countries: A Comparison of the Hodrick-Prescott Filter and the Multivariate Direct Filter Approach

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  • Gyorgy Gyomai

    (OECD)

  • Marc Wildi

    (Zurich University of Applied Sciences)

Abstract

We estimate the business-cycles of G7 countries, as defined by an ideal 2-10 year bandpass filter applied to country-specific GDP target series (GDP-BP). Since this target series cannot be observed in real-time, due to the symmetry of the bandpass filter, we analyze and compare the leading performances of the well-known HP-filter, as currently implemented in the OECD CLI’s, as well as of the Multivariate Direct Filter Approach (MDFA) relying on explanatory time series, as selected for current CLIs. The paper shows that efficiency gains by MDFA over HP are substantial along the full revision-sequence and they are consistent across countries as well as over time, when referenced against GDP-BP. Nous estimons les cycles économiques des pays du G7, définis par un filtre passe-bande idéal de 2 - 10 ans appliqué à des séries du PIB spécifiques à chaque pays. Comme cette série cible ne peut être observée en temps réel, en raison de la symétrie du filtre passe-bande, nous analysons et comparons les caractéristiques avancées du filtre HP bien connu, tel qu'il est actuellement implémenté pour le calcul des indicateurs composites avancés de l’OCDE, ainsi que l’approche par le filtre direct multivarié (MDFA), en s’appuyant sur les séries temporelles actuellement utilisées pour les indicateurs composites avancés. Ce document montre que des gains d'efficacité du filtre direct multivarié par rapport au filtre HP sont considérables au cours de la séquence complète de révision et qu’ils sont cohérents entre les pays ainsi que dans le temps, lorsqu'ils se réfèrent à la série du PIB.

Suggested Citation

  • Gyorgy Gyomai & Marc Wildi, 2012. "OECD Composite Leading Indicators for G7 Countries: A Comparison of the Hodrick-Prescott Filter and the Multivariate Direct Filter Approach," OECD Statistics Working Papers 2012/5, OECD Publishing.
  • Handle: RePEc:oec:stdaaa:2012/5-en
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    File URL: http://dx.doi.org/10.1787/5k4dhnzw8xr3-en
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