Alternative Detrending Procedures for Macroeconomic Time Series

J. Allwood and D. Sheperd
Authors registered in the RePEc Author Service: David Shepherd

No 698, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: In this paper we examine the alternative detrending methods used to identify the stylised facts of the business cycle and develop a simple smoothing procedure that can be used to estimate the asymmetric cycles digested by an important class of macroeconomic models. To illustrate the properties of the asymmetric smoothing procedure, we use it to estimate the trend and cyclical components of real GDP and unemployment in the United States and compare the results with those obtained from the Hodrick-Prescott filter, linear detrending and first differencing. Our results indicate that the choice of an appropriate detrending procedure requires careful consideration of the frequency properties of the primary data and any prior restrictions suggested by economic theory.

Keywords: BUSINESS CYCLES; TIME SERIES; ECONOMETRICS (search for similar items in EconPapers)
JEL-codes: C10 C22 E32 (search for similar items in EconPapers)
Pages: 18 pages
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:mlb:wpaper:698

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