Estimating the Smoothing Parameter in the So-Called Hodrick-Prescott Filter

28 Pages Posted: 29 Mar 2004

See all articles by Ekkehart Schlicht

Ekkehart Schlicht

University of Munich - Department of Economics; IZA Institute of Labor Economics

Date Written: March 2004

Abstract

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

Schlicht, Ekkehart, Estimating the Smoothing Parameter in the So-Called Hodrick-Prescott Filter (March 2004). IZA Discussion Paper No. 1054. Available at SSRN: https://ssrn.com/abstract=523162

Ekkehart Schlicht (Contact Author)

University of Munich - Department of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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