Revisiting the Hodrick-Prescott Filter: A New Perception of the Minimization Problem
AbstractWhen we revisit how reflect the objective of reducing the effects of the growth rates fluctuation in the Hodrick-Prescott filter, we minimize the gap between the value of the trend at time t and a third order average around that value. The paper assesses that the obtained modified Hodrick-Prescott filter better takes into account the structure of the series and gives a stronger estimate of the turning points.
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