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The Extended Hodrick-Prescott (HP) Filter for Spatial Regression Smoothing

  • Wolfgang Polasek

    ()

    (Institute for Advanced Studies, Vienna, Austria; University of Porto, Porto, Portugal)

The Hodrick-Prescott (HP) method is a popular smoothing method for economic time series to get a longterm component of stationary series like growth rates. The new extended HP smoothing model is applied to data-sets with an underlying metric and requires a Bayesian linear regression model with a strong prior based on differencing matrices for the smoothness parameter and a weak prior for the regression part. We define a Bayesian spatial smoothing model with neighbors for each observation and we define a smoothness prior similar to the HP filter in time series. This opens a new approach to model-based smoothers for time series and spatial models based on MCMC. We apply it to the NUTS-2 regions of the European Union for regional GDP and GDP per capita, where the fixed effects are removed by an extended HP smoothing model.

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File URL: http://www.rcfea.org/RePEc/pdf/wp45_11.pdf
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Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 45_11.

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Date of creation: Nov 2011
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Handle: RePEc:rim:rimwps:45_11
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  1. Wolfgang Polasek, 2011. "MCMC Estimation of Extended Hodrick-Prescott (HP) Filtering Models," Working Paper Series 25_11, The Rimini Centre for Economic Analysis.
  2. Morten O. Ravn & Harald Uhlig, 2001. "On Adjusting the HP-Filter for the Frequency of Observations," CESifo Working Paper Series 479, CESifo Group Munich.
  3. Richard Sellner & Wolfgang Polasek, 2011. "Does Globalization a ffect Regional Growth? Evidence for NUTS-2 Regions in EU-27," ERSA conference papers ersa11p819, European Regional Science Association.
  4. Polasek, Wolfgang, 2011. "The Extended Hodrick-Prescott (HP) Filter for Spatial Regression Smoothing," Economics Series 275, Institute for Advanced Studies.
  5. King, R.G. & Rebelo, S.T., 1989. "Low Frequency Filtering And Real Business Cycles," RCER Working Papers 205, University of Rochester - Center for Economic Research (RCER).
  6. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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