The Basel III framework advises considering a reference indicator at the country level to guide the setting of the countercyclical capital buffer: the credit-to-GDP gap. In this paper, I provide empirical evidence suggesting that the credit-to-GDP gap is subject to spurious medium-term cycles,...

Hamilton (2017) criticises the Hodrick and Prescott (1981, 1997) filter (HP filter) because of three drawbacks (i. spurious cycles, ii. end-of-sample bias, iii. ad hoc assumptions regarding the smoothing parameter) and proposes a regression filter as an alternative. I demonstrate that Hamilton's...

The Basel III framework advises considering a reference indicator at the country level to guide the setting of the countercyclical capital buffer: the credit-to-GDP gap. In this paper, I provide empirical evidence suggesting that the credit-to-GDP gap is subject to spurious medium-term cycles,...

Hamilton (2017) criticises the Hodrick and Prescott (1981, 1997) filter (HP filter) because of three drawbacks (i. spurious cycles, ii. end-of-sample bias, iii. ad hoc assumptions regarding the smoothing parameter) and proposes a regression filter as an alternative. I demonstrate that Hamilton's...