The Holt-Winters filter and the one-sided HP filter: A close correspondence

Rodrigo Alfaro and Mathias Drehmann

No 1033, BIS Working Papers from Bank for International Settlements

Abstract: We show that the trend of the one-sided HP filter can be asymptotically approx-imated by the Holt-Winters (HW) filter. The later is an elegant, moving average representation and facilitates the computation of trends tremendously. We confirm the accuracy of this approximation empirically by comparing the one-sided HP filter with the HW filter for generating credit-to-GDP gaps. We find negligible differences, most of them concentrated at the beginning of the sample.

Pages: 20 pages
Date: 2022-07
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Related works:
Journal Article: The Holt–Winters filter and the one-sided HP filter: A close correspondence (2023)
Working Paper: The Holt-Winters filter and the one-sided HP filter: A close correspondence (2022)
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