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A spectral analysis of New Zealand output gaps using Fourier and wavelet techniques

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This paper uses frequency domain techniques to illustrate the properties of various measures of New Zealand's output gap. Measures of the output gap are estimated using a number of different methods: a Structural VAR model, a multivariate unobserved components model, the Hodrick-Prescott filter, a multivariate time series filter, and a linear time trend filter. Spectral densities, calculated using the Fourier transform, highlight a number of important differences in the cyclical properties of the various output gap measures. However, the Fourier transform requires time series to be (weakly) stationary. This may be an unreasonable assumption for New Zealand data given our recent economic history. Accordingly, the paper also uses time-dependant spectra, calculated using wavelet analysis, to further illustrate the cyclical characteristics of the different techniques used to estimate the output gap.

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  • Paul Conway & David Frame, 2000. "A spectral analysis of New Zealand output gaps using Fourier and wavelet techniques," Reserve Bank of New Zealand Discussion Paper Series DP2000/06, Reserve Bank of New Zealand.
    • Handle: RePEc:nzb:nzbdps:2000/06
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    12. Cogley, Timothy & Nason, James M., 1995. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 253-278.
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    Cited by:

    1. Iris Claus, 2000. "Is the output gap a useful indicator of inflation?," Reserve Bank of New Zealand Discussion Paper Series DP2000/05, Reserve Bank of New Zealand.
    2. Crowley, Patrick M., 2010. "Long cycles in growth : explorations using new frequency domain techniques with US data," Research Discussion Papers 6/2010, Bank of Finland.
    3. Castro, Tomás del Barrio & Rodrigues, Paulo M.M. & Taylor, A.M. Robert, 2013. "The Impact Of Persistent Cycles On Zero Frequency Unit Root Tests," Econometric Theory, Cambridge University Press, vol. 29(6), pages 1289-1313, December.
    4. Crowley, Patrick M., 2010. "Long cycles in growth: explorations using new frequency domain techniques with US data," Bank of Finland Research Discussion Papers 6/2010, Bank of Finland.
    5. Mr. Victor Gaiduch & Mr. Benjamin L Hunt, 2000. "Inflation Targeting Under Potential Output Uncertainty," IMF Working Papers 2000/158, International Monetary Fund.
    6. Crowley, Patrick M., 2005. "An intuitive guide to wavelets for economists," Bank of Finland Research Discussion Papers 1/2005, Bank of Finland.
    7. Jitka Pomenkova & Eva Klejmova & Zuzana Kucerova, 2019. "Cyclicality in lending activity of Euro area in pre- and post- 2008 crisis: a local-adaptive-based testing of wavelets," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 19(1), pages 155-175.
    8. Moisa Altar & Ciprian Necula & Gabriel Bobeica, 2009. "A Robust Assessment of the Romanian Business Cycle," Advances in Economic and Financial Research - DOFIN Working Paper Series 28, Bucharest University of Economics, Center for Advanced Research in Finance and Banking - CARFIB.
    9. repec:zbw:bofrdp:2010_006 is not listed on IDEAS
    10. Moisa, Altar & Necula, Ciprian & Bobeica, Gabriel, 2010. "Estimating Potential GDP for the Romanian Economy. An Eclectic Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 5-25, September.
    11. Christoph Schleicher, 2002. "An Introduction to Wavelets for Economists," Staff Working Papers 02-3, Bank of Canada.
    12. repec:zbw:bofrdp:2005_001 is not listed on IDEAS
    13. Patrick Crowley, 2005. "An intuitive guide to wavelets for economists," Econometrics 0503017, University Library of Munich, Germany.
    14. Victor Gaiduch & Benjamin Hunt, 2000. "Inflation targeting under potential output uncertainty," Reserve Bank of New Zealand Discussion Paper Series DP2000/08, Reserve Bank of New Zealand.

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