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On Adjusting the H-P Filter for the Frequency of Observations

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  • Uhlig, H.F.H.V.S.

    (Tilburg University, Center For Economic Research)

  • Ravn, M.

Abstract

This paper studies how the HP-Filter should be adjusted, when changing the frequency of observations. The usual choices in the literature are to adjust the smoothing parameter by multiplying it with either the square of the observation frequency ratios or simply with the observation frequency. In contrast, the paper recommends to adjust the filter parameter by multiplying it with the fourth power of the observation frequency ratios. Based on this suggestion, some well-known comparisons of business cycles moments across countries and time periods are recomputed. In particular, we overturn a finding by Backus and Kehoe (1992) on the historical changes in output volatility and return instead to older conventional wisdom (Baily, 1978, Lucas, 1977): based on the new HP-Filter adjustment rule, output volatility turns out to have decreased after the Second World War.

Suggested Citation

  • Uhlig, H.F.H.V.S. & Ravn, M., 1997. "On Adjusting the H-P Filter for the Frequency of Observations," Discussion Paper 1997-50, Tilburg University, Center for Economic Research.
  • Handle: RePEc:tiu:tiucen:1dd22a17-bed0-4e7c-a2c1-d8cd0f6083ae
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    References listed on IDEAS

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    More about this item

    Keywords

    HP-Filter; frequency of observation; real business cycles; output volatility; pre-war business cycles;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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