TREND EXTRACTION FROM ECONOMIC TIME SERIES WITH MISSING OBSERVATIONS BY GENERALIZED HODRICK–PRESCOTT FILTERS

Hiroshi Yamada

Econometric Theory, 2022, vol. 38, issue 3, 419-453

Abstract: The Hodrick–Prescott (HP) filter has been a popular method of trend extraction from economic time series. However, it is impractical without modification if some observations are not available. This paper improves the HP filter so that it can be applied in such situations. More precisely, this paper introduces two alternative generalized HP filters that are applicable for this purpose. We provide their properties and a way of specifying those smoothing parameters that are required for their application. In addition, we numerically examine their performance. Finally, based on our analysis, we recommend one of them for applied studies.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:cup:etheor:v:38:y:2022:i:3:p:419-453_1

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