Reducing the Excess Variability of the Hodrick-Prescott Filter by Flexible Penalization

Abstract

The Hodrick-Prescott filter is the probably most popular tool for trend estimation in economics. Compared to other frequently used methods like the Baxter-King filter it allows to estimate the trend for the most recent periods of a time series. However, the HodrickPrescott filter suffers from an increasing excess variability at the margins of the series… (More)

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