We show that the trend of the one-sided HP filter can be asymptotically approximated by the Holt-Winters (HW) filter. The later is an elegant, moving average representation and facilitates the computation of trends tremendously. We confirm the accuracy of this approximation empirically by...

We show that the trend of the one-sided HP filter can be asymptotically approximated by the Holt-Winters (HW) filter. The later is an elegant, moving average representation and facilitates the computation of trends tremendously. We confirm the accuracy of this approximation empirically by...

The credit gap, defined as the deviation of the credit-to-GPD ratio from a Hodrick-Prescott (HP) filtered trend, is a powerful early warning indicator for predicting crises. Basel III therefore suggests that policymakers should use it as part of their countercyclical capital buffer frameworks....