Reconciling output gaps: Unobserved components model and Hodrick-Prescott filter

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• 作者：Angelia L. Grant ; Joshua C.C. Chan ; ^{joshuacc.chan@gmail.com}
• 关键词：C11 ; C52 ; E32
• 刊名：Journal of Economic Dynamics and Control
• 出版年：2017
• 出版时间：February 2017
• 年：2017
• 卷：75
• 期：Complete
• 页码：114-121
• 全文大小：410 K
• 卷排序：75

文摘

This paper reconciles two widely used trend–cycle decompositions of GDP that give markedly different estimates: the correlated unobserved components model yields output gaps that are small in amplitude, whereas the Hodrick–Prescott (HP) filter generates large and persistent cycles. By embedding the HP filter in an unobserved components model, we show that this difference arises due to differences in the way the stochastic trend is modeled. Moreover, the HP filter implies that the cyclical components are serially independent—an assumption that is decidedly rejected by the data. By relaxing this restrictive assumption, the augmented HP filter provides comparable model fit relative to the standard correlated unobserved components model.