Estimating the Smoothing Parameter in the So-Called Hodrick-Prescott Filter

Schlicht, Ekkehart (2004): Estimating the Smoothing Parameter in the So-Called Hodrick-Prescott Filter. Discussion Papers in Economics 2004-2

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.

• Item Type: Paper (Discussion Paper)
• Published in: Journal of the Japan Statistical Society, No. 1, Vol. 35, 2005: pp. 99-119.
• Keywords: Hodrick-Prescott filter, Kalman filter, Kalman-Bucy, Whittaker-Henderson graduation, spline, state-space models, random walk, time-varying coefficients, adaptive estimation, time-series, seasonal adjustment, trend
• Collections: Economics; Economics > Discussion Papers in Economics; Economics > Discussion Papers in Economics > Statistical Methods
• Subjects: 300 Social sciences > 300 Social sciences, sociology and anthropology; 300 Social sciences > 330 Economics
• JEL Classification: C22
• Language: English