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Trend extraction with a judgement-augmented hodrick–prescott filter

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Abstract

In this article, it is shown how judgement regarding the cyclical component of a series can be incorporated into the Hodrick–Prescott filter. An analytical expression for the trend extraction under judgement restrictions is derived. It is also shown that imposing judgement in the trend extraction procedure can improve the correlation between the extracted GDP gap and CPI inflation for Sweden, during the period 1981Q1-2007Q4.

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Authors and Affiliations

  1. Ministry of Finance, 103 33, Stockholm, Sweden

    Kristian Jönsson

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  1. Kristian Jönsson
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Correspondence to Kristian Jönsson.

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Jönsson, K. Trend extraction with a judgement-augmented hodrick–prescott filter. Empir Econ 39, 703–711 (2010). https://doi.org/10.1007/s00181-009-0325-3

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  • DOI: https://doi.org/10.1007/s00181-009-0325-3

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