Estimating the trend in US real GDP using the trend filtering

Hiroshi Yamada

Applied Economics Letters, 2017, vol. 24, issue 10, 713-716

Abstract: Using non-Gaussian state-space models, Perron and Wada (2009, Journal of Monetary Economics, 56, 749–765) obtained a nearly piecewise linear trend estimate of US real gross domestic product such that its slope changed around 1973. Such a trend may be regarded as a result of occasional permanent shocks to the growth rate. This article shows that the $${\ell _1}$$ℓ1 trend filtering, which is quite similar to the Hodrick–Prescott filtering and is a type of the recently popular lasso regression, yields almost the same trend estimate, and discusses the reason why this occurs.

Date: 2017
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DOI: 10.1080/13504851.2016.1223811

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