Macroeconomic Forecasting Using Low-Frequency Filters

João Valle e Azevedo
Authors registered in the RePEc Author Service: Ana Pereira

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: We explore the use of univariate low-frequency filters in macroeconomic forecasting. This amounts to targeting only specific fluctuations of the time series of interest. We show through simulations that such approach is warranted and, using US data, we confirm empirically that consistent gains in forecast accuracy can be obtained in comparison with a variety of other methods. There is an inherent arbitrariness in the choice of the cut-off defining low and high frequencies, but we show that some patterns characterize the implied optimal (for forecasting) degree of smoothing of the key macroeconomic indicators we analyze. For most variables the optimal choice amounts to disregarding fluctuations well below the standard business cycle cut-off of 32 quarters while generally increasing with the forecast horizon; for inflation and variables related to housing this cut-off lies around 32 quarters for all horizons, which is below the optimal level for federal spending.

JEL-codes: C14 C32 C51 C53 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-ets and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.bportugal.pt/sites/default/files/anexos/papers/wp201301.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:ptu:wpaper:w201301

Access Statistics for this paper

More papers in Working Papers from Banco de Portugal, Economics and Research Department Contact information at EDIRC.
Bibliographic data for series maintained by DEE-NTD ().