DP2858 On Adjusting the HP-Filter for the Frequency of Observations

Author(s): Morten O Ravn, Harald Uhlig
Publication Date: June 2001
Keyword(s): Business cycles, historical business cycle properties, HP-filter, temporal aggregation, trends
JEL(s): C32, E32
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2858

This Paper studies how the HP-Filter should be adjusted, when changing the frequency of observations. It complements the results of Baxter and King (1999) with an analytical analysis, demonstrating that the filter parameter should be adjusted by multiplying it with the fourth power of the observation frequency ratios. This yields an HP parameter value of 6.25 for annual data given a value of 1600 for quarterly data. The relevance of the suggestion is illustrated empirically.