Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/215464
Authors: 
Canova, Fabio
Year of Publication: 
2020
Series/Report no.: 
Sveriges Riksbank Working Paper Series 386
Abstract: 
I study potentials and gaps, permanent and transitory fluctuations in macroeconomic variables using the Smets and Wouter (2007) model. Model-based gaps display low frequency variations; possess more than business cycle fluctuations; have similar frequency representation as potentials, and are correlated with them. Permanent and transitory fluctuations display similar features, but are uncorrelated. I use a number of filters to extract trends and cycles using simulated data. Gaps are best approximated with a polynomial filter; transitory fluctuations with a differencing approach, but distortions are large. Explanations for the results are given. I propose a filter which reduces the biases of existing procedures.
Subjects: 
Gaps and potentials
permanent and transitory components
filtering
cyclical fluctuations
gain functions
JEL: 
C31
E27
E32
Document Type: 
Working Paper

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