On Adjusting the HP-Filter for the Frequency of Observations
Morten O. Ravn
European University Institute - Economics Department (ECO); London Business School - Department of Economics; University of Southampton; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)
University of Chicago - Department of Economics
CEPR Discussion Paper No. 2858
This Paper studies how the HP-Filter should be adjusted, when changing the frequency of observations. It complements the results of Baxter and King (1999) with an analytical analysis, demonstrating that the filter parameter should be adjusted by multiplying it with the fourth power of the observation frequency ratios. This yields an HP parameter value of 6.25 for annual data given a value of 1600 for quarterly data. The relevance of the suggestion is illustrated empirically.
Number of Pages in PDF File: 24
Keywords: Business cycles, trends, HP-filter, temporal aggregation, historical business cycle properties
JEL Classification: C32, E32working papers series
Date posted: July 21, 2001
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