hpfilter {mFilter} | R Documentation |
Hodrick-Prescott filter of a time series
Description
This function implements the Hodrick-Prescott for estimating cyclical and trend component of a time series. The function computes cyclical and trend components of the time series using a frequency cut-off or smoothness parameter.
Usage
hpfilter(x,freq=NULL,type=c("lambda","frequency"),drift=FALSE)
Arguments
x |
a regular time series. |
type |
character, indicating the filter type,
|
freq |
integer, if |
drift |
logical, |
Details
Almost all filters in this package can be put into the
following framework. Given a time series \{x_t\}^T_{t=1}
we are
interested in isolating component of x_t
, denoted y_t
with
period of oscillations between p_l
and p_u
, where 2
\le p_l < p_u < \infty
.
Consider the following decomposition of the time series
x_t = y_t + \bar{x}_t
The component y_t
is assumed to have power only in the frequencies
in the interval \{(a,b) \cup (-a,-b)\} \in (-\pi, \pi)
. a
and b
are related to p_l
and p_u
by
a=\frac{2 \pi}{p_u}\ \ \ \ \ {b=\frac{2 \pi}{p_l}}
If infinite amount of data is available, then we can use the ideal bandpass filter
y_t = B(L)x_t
where the filter, B(L)
, is given in terms of the lag operator
L
and defined as
B(L) = \sum^\infty_{j=-\infty} B_j L^j, \ \ \ L^k x_t = x_{t-k}
The ideal bandpass filter weights are given by
B_j = \frac{\sin(jb)-\sin(ja)}{\pi j}
B_0=\frac{b-a}{\pi}
The Hodrick-Prescott filter obtains the filter weights \hat{B}_j
as a solution to
\hat{B}_{j}= \arg \min E \{ (y_t-\hat{y}_t)^2 \} = \arg \min
\left\{ \sum^{T}_{t=1}(y_t-\hat{y}_{t})^2 + \lambda\sum^{T-1}_{t=2}(\hat{y}_{t+1}-2\hat{y}_{t}+\hat{y}_{t-1})^2 \right\}
The Hodrick-Prescott filter is a finite data approximation with following moving average weights
\hat{B}_j=\frac{1}{2\pi}\int^{\pi}_{-\pi}
\frac{4\lambda(1-\cos(\omega))^2}{1+4\lambda(1-\cos(\omega))^2}e^{i \omega
j} d \omega
If drift=TRUE
the drift adjusted series is obtained as
\tilde{x}_{t}=x_t-t\left(\frac{x_{T}-x_{1}}{T-1}\right), \ \ t=0,1,\dots,T-1
where \tilde{x}_{t}
is the undrifted series.
Value
A "mFilter
" object (see mFilter
).
Author(s)
Mehmet Balcilar, mehmet@mbalcilar.net
References
M. Baxter and R.G. King. Measuring business cycles: Approximate bandpass filters. The Review of Economics and Statistics, 81(4):575-93, 1999.
L. Christiano and T.J. Fitzgerald. The bandpass filter. International Economic Review, 44(2):435-65, 2003.
J. D. Hamilton. Time series analysis. Princeton, 1994.
R.J. Hodrick and E.C. Prescott. Postwar US business cycles: an empirical investigation. Journal of Money, Credit, and Banking, 29(1):1-16, 1997.
R.G. King and S.T. Rebelo. Low frequency filtering and real business cycles. Journal of Economic Dynamics and Control, 17(1-2):207-31, 1993.
D.S.G. Pollock. Trend estimation and de-trending via rational square-wave filters. Journal of Econometrics, 99:317-334, 2000.
See Also
mFilter
, bwfilter
, cffilter
,
bkfilter
, trfilter
Examples
## library(mFilter)
data(unemp)
opar <- par(no.readonly=TRUE)
unemp.hp <- hpfilter(unemp)
plot(unemp.hp)
unemp.hp1 <- hpfilter(unemp, drift=TRUE)
unemp.hp2 <- hpfilter(unemp, freq=800, drift=TRUE)
unemp.hp3 <- hpfilter(unemp, freq=12,type="frequency",drift=TRUE)
unemp.hp4 <- hpfilter(unemp, freq=52,type="frequency",drift=TRUE)
par(mfrow=c(2,1),mar=c(3,3,2,1),cex=.8)
plot(unemp.hp1$x, ylim=c(2,13),
main="Hodrick-Prescott filter of unemployment: Trend, drift=TRUE",
col=1, ylab="")
lines(unemp.hp1$trend,col=2)
lines(unemp.hp2$trend,col=3)
lines(unemp.hp3$trend,col=4)
lines(unemp.hp4$trend,col=5)
legend("topleft",legend=c("series", "lambda=1600", "lambda=800",
"freq=12", "freq=52"), col=1:5, lty=rep(1,5), ncol=1)
plot(unemp.hp1$cycle,
main="Hodrick-Prescott filter of unemployment: Cycle,drift=TRUE",
col=2, ylab="", ylim=range(unemp.hp4$cycle,na.rm=TRUE))
lines(unemp.hp2$cycle,col=3)
lines(unemp.hp3$cycle,col=4)
lines(unemp.hp4$cycle,col=5)
## legend("topleft",legend=c("lambda=1600", "lambda=800",
## "freq=12", "freq=52"), col=1:5, lty=rep(1,5), ncol=1)
par(opar)