An Investigation of the Cycle Extraction Properties of Several Bandpass Filters Used to Identify Business Cycles

Hinich, M. V., Foster, J. and Wild, P. (2008) An Investigation of the Cycle Extraction Properties of Several Bandpass Filters Used to Identify Business Cycles. Discussion Paper No. 358, School of Economics, The University of Queensland.

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Author Hinich, M. V.
Foster, J.
Wild, P.
Title An Investigation of the Cycle Extraction Properties of Several Bandpass Filters Used to Identify Business Cycles
School, Department or Centre School of Economics
Institution The University of Queensland
Report Number Discussion Paper No. 358
Publication date 2008-03-01
Language eng
Subject 14 Economics
Abstract/Summary The purpose of this article is to investigate the ability of bandpass filters commonly used in economics to extract a known periodicity. The specific bandpass filters investigated include a Discrete Fourier Transform (DFT) filter, together with those proposed by Hodrick and Prescott (1997) and Baxter and King (1999). Our focus on the cycle extraction properties of these filters reflects the lack of attention that has been given to this issue in the literature, when compared, for example, to studies of the trend removal properties of some of these filters. The artificial data series we use are designed so that one periodicity deliberately falls within the passband while another falls outside. The objective of a filter is to admit the ‘bandpass’ periodicity while excluding the periodicity that falls outside the passband range. We find that the DFT filter has the best extraction properties. The filtered data series produced by both the Hodrick-Prescott and Baxter-King filters are found to admit low frequency components that should have been excluded.
Keyword business cylces
bandpass filter
cycle extraction
Discrete Fourier Transform (DFT)

Document type: Department Technical Report
Collection: Discussion Papers (School of Economics)
 
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Created: Tue, 09 Sep 2008, 15:27:06 EST by Diana Guillemin on behalf of School of Economics