Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/195063 
Year of Publication: 
2019
Series/Report no.: 
IMFS Working Paper Series No. 133
Publisher: 
Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS), Frankfurt a. M.
Abstract: 
The authors contribute to the debate regarding the reliability of output gap estimates. As an alternative to the Hodrick-Prescott (HP) filter, they propose a simple modification of the filter proposed by Hamilton in 2018 that shares its favorable real-time properties, but leads to a more even coverage of typical business cycle frequencies. Based on output growth and inflation forecasts and a comparison to revised output gap estimates from policy institutions, they find that real-time output gaps based on the modified Hamilton filter are economically much more meaningful measures of the business cycle than those based on other simple statistical trend-cycle decomposition techniques such as the HP or the Bandpass filter.
Subjects: 
output gap
potential output
trend-cycle decomposition
Hamilton filter
real-time data
inflation forecasting
JEL: 
C18
E32
E37
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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