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Mechanical Detrending by Hodrick-Prescott Filtering: A Note.

The Hodrick-Prescott filter is widely used to extract cyclical movements about trend in macroeconomic time series. The filter is based on the assumption that nonstationary movements in time series are captured by smooth and slowly changing trends. This note shows that applying the Hodrick-Prescott filter to time series with stochastic trends may extract cyclical movements which are entirely spurious.
Year of publication:
1994
Authors: Jaeger, Albert
Published in:
Empirical Economics. - Department of Economics and Finance Research and Teaching. - Vol. 19.1994, 3, p. 493-500
Publisher: Department of Economics and Finance Research and Teaching
Type of publication: Article
Source:
Persistent link: https://www.econbiz.de/10005184264
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