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Schlicht, Ekkehart (2004): Estimating the Smoothing Parameter in the So-Called Hodrick-Prescott Filter. Discussion Papers in Economics 2004-2 Journal of the Japan Statistical Society, 35
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Abstract

This note gives a fairly complete statistical description of the Hodrick-Prescott Filter (1997), originally proposed by Leser (1961). It builds on an approach to seasonal adjustment suggested by Leser (1963) and Schlicht (1981, 1984). A moments estimator for the smoothing parameter is proposed that is asymptotically equivalent to the maximum-likelihood estimator, has a straightforward intuitive interpretation and is more appropriate for short series than the maximum-likelihood estimator. The method is illustrated by an application and several simulations.