The Basel III regulation explicitly prescribes the use of Hodrick-Prescott filters to estimate credit cycles and calibrate countercyclical capital buffers. However, filter has been found suffer from large ex-post revisions, raising concerns over its fitness for policy use. To investigate this problem, we studied a panel 26 countries between 1971 2018. We reached two conclusions. bad news is tha...

This paper studies the business cycle in Germany using the HP-filter (Hodrick/Prescott (1997)) to isolate the cyclical component. A two-country International Business Cycle model in line with Baxter/Crucini (1995) is built to explain these facts. The combination of GHH-preferences with taste shocks resulting from government consumption is shown to be an important feature of the German business ...

Trend growth in total factor productivity (TFP) is unobserved; it evolves continually over time. That assumption is inherent in the use of the Hodrick-Prescott or other bandpass filters to extract trends. Similarly, the Kalman filter/unobserved-components approach assumes that changes in the trend growth rate are normally distributed. In fact, some changes to the trend growth rate of total fact...

Considering the problem of extracting a trend from a time series, we propose a novel approach based on empirical mode decomposition (EMD), called EMD trend filtering. The rationale is that EMD is a completely data-driven technique, which offers the possibility of estimating a trend of arbitrary shape as a sum of low-frequency intrinsic mode functions produced by the EMD. Based on an empirical a...

In this paper three hypotheses concerning the cyclicality of U.S. consumers’ expenditure are proposed. These hypotheses are based upon the distinction between expenditure on durable and non-durable goods. It is argued that durability will lead to increased cyclical sensitivity and that this increased cyclicality will be of an asymmetric nature. The asymmetric adjustment will be of the form of d...

This paper presents short summary about commonly used filters in macroeconomics. We consider Hodrick-Prescott filter, Butterworth filter, Ideal Bandpass filter, Baxter-King filter and Christiano-Fitzgerald filter. 1 The filtering problem Given raw data, {xt}t=1, we are interested in isolating component of xt, denoted by {yt}t=1, with period of oscillation between pl and pu, where 2 ≤ pl < pu < ...

This is a revised version of chapter II in my forthcoming thesis at Massachusetts Institute of Technology. A frequency band specific measure of the degree of linear comovement is defined. The distribution of the measure is simulated using Monte Carlo methods. The sensitivity of the distributions to the characteristics of the underlying processes is substantially reduced if low frequencies are e...