Is “the ideal filter” really ideal : the usage of frequency filtering and spurious cycles
Part of : SEEJE ; Vol.3, No.1, 2005, pages 79-96
Issue:
Pages:
79-96
Author:
Abstract:
In this paper the filter of Hodrick and Prescott, the band-pass filter of Baxter and King, "the ideal filter" and the first-differencing are analyzed. It is shown that ideal filters are able to produce spurious cycles not only when a unit root is present in the data but also when the root is less than unity. The main critiques of first-differencing are outlined and further analyzed. The conclusion is that differencing and more generally methods in conformity with the underlying properties of non-stationary series are the preferable choice. At the same time the application of ideal filters and their approximations (including HP and BP) is very dangerous and their usage is to be avoided.
Subject (LC):
Keywords:
frequency filtering, Hodrick-Prescott filter; Band-Pass filter, spurious cycles
Notes:
Περιέχει διαγράμματα και βιβλιογραφία, JEL Classification: C22
