HP vs. Hamilton: which is better to estimate trends? A comparison based on Euro Area GDP

Artur Silva Lopes ()

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: This paper reconsiders the case of the rivalry between the HP and the Hamilton detrending methods, assessing it from a new angle, that of estimation of the trend itself. An extensive Monte Carlo study based on Euro area GDP is performed which, besides confirming and even reinforcing the superiority of the HP filter in terms of goodness of fit, demonstrates that, when the assessment criteria are designed to measure the success in terms of replicating long-run properties, the positions are switched, Hamilton's method dominating the HP filter. Since, however, both methods exhibit implausible features, a combination of them is employed to derive some empirical evidence concerning the Euro Area economy.

Keywords: trends; trend-cycle decomposition; detrending; Euro Area (search for similar items in EconPapers)
JEL-codes: C18 C22 E01 O47 (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/344078/1/trendea.pdf (application/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:zbw:esprep:344078

Access Statistics for this paper

More papers in EconStor Preprints from ZBW - Leibniz Information Centre for Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().