To Boost or Not to Boost? That is the Question

Ye Lu and Adrian Pagan

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Phillips and Shi (2021) have argued that there may be some leakage from the estimate of the permanent component to what is meant to be the transitory component when one uses the Hodrick-Prescott filter. They argue that this can be eliminated by boosting the filter. We show that there is no leakage from the filter per se, so boosting is not needed for that. They also argue that there are DGP’s for the components for which the boosted filter tracks these more accurately. We show that there are other plausible DGP’s where the boosted filter tracks less accurately, and what is crucial to tracking performance is how important permanent shocks are to growth in the series being filtered. In particular, the DGP’s used in Phillips and Shi (2021) have a very high contribution from permanent shocks.

Keywords: Boosting; Hodrick-Prescott filter; Component models (search for similar items in EconPapers)
JEL-codes: C10 E32 E37 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2023-02
New Economics Papers: this item is included in nep-ecm and nep-ets
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Working Paper: To Boost or Not to Boost? That is the Question (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2023-12

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