Performance Comparison of Modified HP Filter, Wavelet Analysis and Empirical Mode Decomposition for Smoothing Macroeconomic Time Series

Javed Iqbal and Muhammad Hanif

No 87, SBP Working Paper Series from State Bank of Pakistan, Research Department

Abstract: We compare performance of modified HP filter, wavelet analysis and empirical mode decomposition. Our simulation study results suggest that modified HP filter performs better for an overall time series. However, in the middle (of time series) wavelet analysis performs best. Wavelet analysis based filtering has highest ‘end points bias (EPB)’. However, it performs better when we extrapolate the subject time series to lower the EPB. Study based on observed data of real income, investment and consumption shows that the autoregressive properties and multivariate analytics of cyclical components depend upon filtering technique.

Keywords: Business Cycle; Smoothing Macro Time Series; Modified HP Filter; Wavelet Analysis; End Point Bias in HP Filter; Simulation; Cross Country Study. (search for similar items in EconPapers)
JEL-codes: C18 E32 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2017-03
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mac
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Citations: View citations in EconPapers (2)

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