Resource title

Using HP Filtered Data for Econometric Analysis : Some Evidence from Monte Carlo Simulations

Resource image

image for OpenScout resource :: Using HP Filtered Data for Econometric Analysis : Some Evidence from Monte Carlo Simulations

Resource description

The Hodrick-Prescott (HP) filter has become a widely used tool for detrending integrated time series in applied econometric analysis. Even though the theoretical time series literature sums up an extensive catalogue of severe criticism against an econometric analysis of HP filtered data, the original Hodrick and Prescott (1980, 1997) suggestion to measure the strength of association between (macro-)economic variables by a regression analysis of corresponding HP filtered time series still appears to be popular. A contradictory situation which might be justified only if HP induced distortions were quantitatively negligible in empirical applications. However, this hypothesis can hardly be maintained as the simulation results presented within this paper indicate that HP filtered series give seriously rise to spurious regression results.

Resource author

Peter Winker, Mark Meyer

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/23936

Resource license

Adapt according to the presented license agreement and reference the original author.