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Exact Formulas for the Hodrick-Prescott Filter

Tucker McElroy

KEY WORDS:

ABSTRACT

The Hodrick-Prescott (HP) filter is widely used in the field of economics to estimate trends and cycles from time series data. For certain applications -- such as deriving implied trend and cycle models and obtaining filter weights -- it is desirable to express the frequency response of the HP as the spectral density of an ARMA model; in other words, to accomplish the spectral factorization of the HP filter. This paper presents an exact approach to this problem, which makes it possible to provide exact algebraic formulas for the HP filter coefficients in terms of the HP's signal-noise ratio.

CITATION:

Source: U.S. Census Bureau, Statistical Research Division

Created: September 7, 2006
Last revised: September 7, 2006


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Source: U.S. Census Bureau | Statistical Research Division | (301) 763-3215 (or chad.eric.russell@census.gov) |   Last Revised: October 08, 2010