To implement this approach, we filtered unemployment using the Hodrick-Prescott filter
(Hodrick and Prescott 1997) (HP filter), as suggested by Ionides, Wang, and Tapia Granados (2012), as well as other applied techniques suggested as alternatives.
We examine three examples of this approach: the Hodrick-Prescott filter
, the band-pass filter, and the Beveridge-Nelson decomposition.
However, the trend or longer-run component of the Hodrick-Prescott filter
inherits the nonstationarity of the original series and is therefore not suitable for our purposes.
1995: Effects of the Hodrick-Prescott filter
on trend and difference stationary time series Implications for business cycle research.
Using home data of 138 CBSAs from February 2000 to April 2011, a period of over eleven years, monthly adjustment factors for these CBSAs are generated using a standard Hodrick-Prescott filter
In this vein, we use the Hodrick-Prescott filter
approach to provide an initial impression of the behavior of a series relative to its trend.
During the past year we have compared alternative univariate techniques for the estimation of the growth cycle and we now regularly publish three alternative growth cycle estimates based on the Hodrick-Prescott filter
, the Christiano-Fitzgerald filter and the Unobserved Components models filter in the Eurostatistics publication.
The most common are statistical filters, including the Hodrick-Prescott filter
, band-pass filters, Kalman filters, and Beveridge-Nelson decompositions.
The multivariate filter is an augmented version of the Hodrick-Prescott filter
and employed by the Reserve Bank of New Zealand in its assessment of current and future economic conditions.
Indeed, even after the upward trend from the earlier period is removed (using, for example, a Hodrick-Prescott filter
or a linear spline, not shown), the decline in the participation rate in recent years seems large and unusually protracted by historical standards.
The analysis uses three different trend-generating processes on the basis of the logarithm of industrial production: a quadratic trend (eurogap1), a linear trend (eurogap2), and a Hodrick-Prescott filter
with the penalty parameter set to 14400 (eurogap3).
The Hodrick-Prescott filter
is a simple, widely used technical method (6).