Why you should never use the Hodrick-Prescott filter: comment

Alban Moura

MPRA Paper from University Library of Munich, Germany

Abstract: Hamilton (2018) argues that one should never use the Hodrick-Prescott (HP) filter to detrend economic time series and proposes a new regression-based approach. This comment shows that this alternative shares the main drawbacks Hamilton finds in the HP filter: filter-induced dynamics in the estimated cycles and arbitrariness in the choice of a filter-defining parameter. In addition, the Hamilton trend lags the data by construction, leading to peculiar timing properties. Overall, it seems unlikely that the Hamilton filter really improves on the HP filter in practice.

Keywords: HP filter; Hamilton filter; business cycles; detrending; filtering (search for similar items in EconPapers)
JEL-codes: B41 C22 E32 (search for similar items in EconPapers)
Date: 2022-10
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https://mpra.ub.uni-muenchen.de/114922/1/MPRA_paper_114922.pdf original version (application/pdf)

Related works:
Journal Article: Why You Should Never Use the Hodrick-Prescott Filter. A Comment on Hamilton (The Review of Economics and Statistics, 2018) (2024)
Working Paper: Why you should never use the Hodrick-Prescott Filter: Comment (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:114922

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