Sparse HP Filter: Finding Kinks in the COVID-19 Contact Rate

47 Pages Posted: 9 Jul 2020

See all articles by Sokbae Lee

Sokbae Lee

Seoul National University

Yuan Liao

Rutgers, The State University of New Jersey - New Brunswick/Piscataway

Myung Hwan Seo

Seoul National University - School of Economics

Youngki Shin

Department of Economics

Date Written: June 18, 2020

Abstract

In this paper, we estimate the time-varying COVID-19 contact rate of a Susceptible-Infected-Recovered (SIR) model. Our measurement of the contact rate is constructed using data on actively infected, recovered and deceased cases. We propose a new trend filtering method that is a variant of the Hodrick-Prescott (HP) filter, constrained by the number of possible kinks. We term it the sparse HP filter and apply it to daily data from five countries: Canada, China, South Korea, the UK and the US. Our new method yields the kinks that are well aligned with actual events in each country. We find that the sparse HP filter provides a fewer kinks than the l1 trend filter, while both methods fitting data equally well. Theoretically, we establish risk consistency of both the sparse HP and l1 trend filters. Ultimately, we propose to use time-varying contact growth rates to document and monitor outbreaks of COVID-19.

Note: Funding: This work is in part supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea, the McMaster COVID-19 Research Fund (Stream 2), the European Research Council (ERC-2014-CoG-646917-ROMIA) and the UK Economic and Social Research Council for research grant (ES/P008909/1) to the CeMMAP.

Declaration of Interest: Authors do not have any conflicts of interest.

Keywords: COVID-19, trend filtering, knots, piecewise linear fitting, Hodrick-Prescott filter

JEL Classification: C51, C52, C22

Suggested Citation

Lee, Sokbae and Liao, Yuan and Seo, Myung Hwan and Shin, Youngki, Sparse HP Filter: Finding Kinks in the COVID-19 Contact Rate (June 18, 2020). Available at SSRN: https://ssrn.com/abstract=3634265 or http://dx.doi.org/10.2139/ssrn.3634265

Sokbae Lee

Seoul National University ( email )

Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)

Yuan Liao

Rutgers, The State University of New Jersey - New Brunswick/Piscataway ( email )

94 Rockafeller Road
New Brunswick, NJ 08901
United States

HOME PAGE: http://rci.rutgers.edu/~yl1114

Myung Hwan Seo

Seoul National University - School of Economics ( email )

San 56-1, Silim-dong, Kwanak-ku
Seoul 151-742

Youngki Shin (Contact Author)

Department of Economics ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

HOME PAGE: http://sites.google.com/site/yshin12

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