Estimating the Smoothing Parameter in the So-Called Hodrick-Prescott Filter
28 Pages Posted: 29 Mar 2004
Date Written: March 2004
This note gives a fairly complete statistical description of the Hodrick-Prescott Filter (1997) which has been proposed in the context of my seasonal adjustment method (Schlicht 1981, 1984). A statistics estimator for the smoothing parameter is proposed that is asymptotically equivalent to the maximum-likelihood estimator and has a straightforward intuitive interpretation. The method is illustrated by an application and several simulations.
Keywords: Hodrick-Prescott filter, Kalman filtering, Kalman-Bucy, state-space models, random walk, time-varying coefficients, adaptive estimation, time-series, seasonal adjustment, trend
JEL Classification: C22
Suggested Citation: Suggested Citation