The Commission Services’ Cyclical Adjustment Method

Bank of Italy Indicators of Structural Budget Balances Conference, p. 17, 1998

36 Pages Posted: 17 Jul 2012

See all articles by Werner Roeger

Werner Roeger

European Commission, DGECFIN

Hedwig Ongena

European Union - European Commission

Date Written: November 28, 1998

Abstract

The authors present the Hodrick Prescott filter and characterize its main features. The selection of the smoothing parameter and its impact on the extraction of the cyclical component are examined more closely. Attention is also given to the so-called end point bias problem. The Hodrick Prescott filter is then compared to other trend estimation methods, such as the band pass filter, linear time trend methods and the production function approach. The output gap estimates resulting from these different methods are compared to other business cycle indicators, such as the degree of capacity utilization and the producer sentiment indicator. Ongena and Röger stress that output gap estimates obtained via the European Commission’s QUEST production function are used to check the plausibility of the results obtained via the HP filter.

Suggested Citation

Roeger, Werner and Ongena, Hedwig, The Commission Services’ Cyclical Adjustment Method (November 28, 1998). Bank of Italy Indicators of Structural Budget Balances Conference, p. 17, 1998, Available at SSRN: https://ssrn.com/abstract=2109634

Werner Roeger (Contact Author)

European Commission, DGECFIN ( email )

Economic and Financial Affairs
BU1-3/159, 200 Rue de la Loi
B-1049 Brussels
Belgium

Hedwig Ongena

European Union - European Commission ( email )

Rue de la Loi 200
Brussels, B-1049
Belgium

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
34
Abstract Views
547
PlumX Metrics