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The Hodrick-Prescott filter with priors: linear restrictions on HP filters

  • Julio Roman, Juan Manuel

A closed formula for the Hodrick & Prescott, HP, filter subject to linear restrictions is derived. This filter is also known as the HP filter with priors. When the formula is applied to the ordinary HP filter linear restrictions apply only within the sample. However, when this formula is applied to the extended HP filter and extensions that correct for GDP revisions and delays, linear restrictions apply out of sample also.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34202.

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Date of creation: 19 Oct 2011
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Handle: RePEc:pra:mprapa:34202
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  1. Timothy Cogley & James M. Nason, 1993. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series: implications for business cycle research," Working Papers in Applied Economic Theory 93-01, Federal Reserve Bank of San Francisco.
  2. Regina Kaiser & Agustín Maravall, 2004. "Combining filter design with model based filtering (with an application to business cycle estimation)," Banco de Espa�a Working Papers 0417, Banco de Espa�a.
  3. Juan Manuel Julio, . "Data Revisions and the Output Gap," Borradores de Economia 642, Banco de la Republica de Colombia.
  4. Regina Kaiser & Agustín Maravall, 1999. "Estimation of the Business Cycle: a Modified Hodrick-Prescott Filter," Banco de Espa�a Working Papers 9912, Banco de Espa�a.
  5. Juan Manuel Julio Román, 2011. "Modeling Data Revisions," BORRADORES DE ECONOMIA 007929, BANCO DE LA REPÚBLICA.
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