A New Method for Combining Detrending Techniques with Application to Business Cycle Synchronization of the New EU Members

Zsolt Darvas and Gabor Vadas

No 505, Working Papers from Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest

Abstract: Decomposing output into trend and cyclical components is an uncertain exercise and depends on the method applied. It is an especially dubious task for countries undergoing large structural changes, such as transition countries. Despite their deficiencies, however, univariate detrending methods are frequently adopted for both policy oriented and academic research. This paper proposes a new procedure for combining univariate detrending techniques which is based on revisions of the estimated output gaps adjusted by the variance of and the correlation among output gaps. The procedure is applied to the study of the similarity of business cycles between the euro area and new EU Member States.

Keywords: combination; detrending; new EU members; OCA; output gap; revision (search for similar items in EconPapers)
JEL-codes: C22 E32 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2005-08-15
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-mac and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: A New Method for Combining Detrending Techniques with Application to Business Cycle Synchronization of the New EU Members (2005)
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