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Selecting a Boosted HP Filter for Growth Cycle Analysis Based on Maximising Sharpness

Author

Listed:
  • Viv B. Hall

    (Victoria University of Wellington
    ANU)

  • Peter Thomson

    (Victoria University of Wellington
    Statistics Research Associates Ltd)

Abstract

The boosted HP (bHP) trend filter iterates the standard HP filter until the resulting trend deviation is free of any stochastic trend with the latter determined by suitable stopping rules. Here the performance and properties of the bHP trend filter for growth cycle analysis are considered based on the time-invariant moving-average representation of the bHP filter in the body of the series. We propose alternative trend selection criteria based on a constant cut-off frequency and maximising sharpness. We find there is a strong case for selecting a bHP trend filter with an 8-year rather than a 10-year cut-off period, and that using a bHP filter with 2 iterations (twicing) or a sharpened HP filter is preferable to using the standard HP filter.

Suggested Citation

  • Viv B. Hall & Peter Thomson, 2024. "Selecting a Boosted HP Filter for Growth Cycle Analysis Based on Maximising Sharpness," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 20(2), pages 193-217, July.
    • Handle: RePEc:spr:jbuscr:v:20:y:2024:i:2:d:10.1007_s41549-024-00093-9
    DOI: 10.1007/s41549-024-00093-9
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    More about this item

    Keywords

    Boosted HP filter; Hodrick–Prescott filter; Growth cycles; Transfer function; Sharpness; Cut-off frequency;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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