A contribution to the analysis of historical economic fluctuations (1870-2010): filtering, spurious cycles and unobserved component modelling

José Luis Cendejas Bueno, Félix-Fernando Muñoz (felix.munoz@uam.es) and Nadia Fernández-de-Pinedo (nadia.pinedo@uam.es)
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Nadia Fernández-de-Pinedo: Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.
Authors registered in the RePEc Author Service: Nadia Fernandez de Pinedo

No 2015/04, Working Papers in Economic Theory from Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History)

Abstract: Time series filtering methods such as the Hodrick-Prescott (HP) filter, with a consensual choice of the smoothing parameter, eliminate the possibility of identifying long swing cycles (e.g., Kondratieff type) or, alternatively, may distort periodicities that are in fact present in the data, giving rise, for example, to spurious Kuznets-type cycles. In this paper, we propose filtering Maddison’s time series for the period 1870-2010 for a selection of developed countries using a less restrictive filtering technique that does not impose but rather estimates the cut-off frequency. In particular, we use unobserved component models that optimally estimate the smoothing parameter. Using this methodology, we identify cycles of periods mainly in the range of 4-7 years (Juglar type cycles), as well as a pattern of cyclical convergence that deepens with globalization processes. After 1950, a common business cycle factor grouping all economies is found.

Keywords: historical business cycles; spectral analysis; unobserved component models; Maddison’s time series. (search for similar items in EconPapers)
JEL-codes: C32 E32 N1 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2015-04
New Economics Papers: this item is included in nep-his and nep-mac
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Citations: View citations in EconPapers (3)

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Journal Article: A contribution to the analysis of historical economic fluctuations (1870–2010): filtering, spurious cycles, and unobserved component modeling (2017)
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