ESTIMATION OF THE CYCLICAL COMPONENT OF ECONOMIC TIME SERIES

Maria-Helena A. Dias, Joilson Dias () and Charles L. Evans ()

Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting] from ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]

Abstract: The objective of this paper is to show an alternative technique to smooth time series from Monte Carlo Simulations. The technique considers that time series can contain more than one structural break, coming from movements in coefficients of trend or from intercept. The Hodrick-Prescott Filter (HP) does not provide identification of such possible breaks in order to smooth trend from the series to analyze its cyclical component. If the series are relatively stable, this problem may not have relevant implications. Otherwise, for economies relatively unstable, trend movements may interfere in the specification of the cyclical component, and Hodrick-Prescott smoothing could lead empiricists to achieve simplistic forms to economic cycles. In the context, we present an empirical methodology that allows structural breaks in any point of time, from coefficients or from intercepts. We apply this recursive technique to different models with variations in trend, from coefficients and from intercepts, using series simulated by Monte Carlo. Moreover, we compare the results of both techniques to the Brazilian GDP.

JEL-codes: E32 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-ets, nep-mac and nep-mon
Date: 2004
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Persistent link: http://EconPapers.repec.org/RePEc:anp:en2004:104

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