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Managing the Uncertainty in the Hodrick Prescott Filter

Author

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  • Leon, Jorge

Abstract

This paper modifies the standard Hodrick Prescot Filter in order to reduce the problem of misleading predictive outcome when used with updated information. The modification allow for a more accurate estimation of output gap, as well as the introduction of confidence intervals that permit a better understanding of the uncertainty related to the estimation of the filter. Also improve the efficiency using a correction for autocorrelation in the errors of estimation.

Suggested Citation

  • Leon, Jorge, 2012. "Managing the Uncertainty in the Hodrick Prescott Filter," MPRA Paper 44531, University Library of Munich, Germany, revised 2012.
    • Handle: RePEc:pra:mprapa:44531
    as

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    File URL: https://mpra.ub.uni-muenchen.de/44531/1/MPRA_paper_44531.pdf
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    References listed on IDEAS

    as
    1. Albert Marcet & Morte O. Ravn, "undated". "The HP-Filter in Cross-Country Comparisons," Studies on the Spanish Economy 100, FEDEA.
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    More about this item

    Keywords

    Filter; Hodrick Prescott; Uncertainty;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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