Is "The ideal filter" really Ideal: The usage of Frequency Filtering and Spurious Cycles

Lyubomir Ivanov
Additional contact information
Lyubomir Ivanov: Tsenov Academy of Economics

South-Eastern Europe Journal of Economics, 2005, vol. 3, issue 1, 79-96

Abstract: In this paper the filter of Hodrick and Prescott, the band-pass filter of Baxter and King, "the ideal filter" and the first-differencing are analyzed. It is shown that ideal filters are able to produce spurious cycles not only when a unit root is present in the data but also when the root is less than unity. The main critiques of first-differencing are outlined and further analyzed. The conclusion is that differencing and more generally methods in conformity with the underlying properties of non-stationary series are the preferable choice. At the same time the application of ideal filters and their approximations (including HP and BP) is very dangerous and their usage is to be avoided.

Keywords: Frequency filtering; Hodrick-Prescott filter; Band-Pass Filter; Spurious Cycles (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.asecu.gr/Seeje/issue04/ivanov.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:seb:journl:v:3:y:2005:i:1:p:79-96

Access Statistics for this article

More articles in South-Eastern Europe Journal of Economics from Association of Economic Universities of South and Eastern Europe and the Black Sea Region Contact information at EDIRC.
Bibliographic data for series maintained by Ms. Melina Petromelidou ().