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Permanent URL to this publication: http://dx.doi.org/10.5167/uzh-51956

Schenk-Hoppé, Klaus Reiner (2001). Economic Growth and Business Cycles: A Critical Comment on Detrending Time Series - REVISED VERSIO. Working paper series / Institute for Empirical Research in Economics No. 54, University of Zurich.

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Abstract

In this paper we pursue an approach based on economic theory to illustrate possible shortcomings of widely-used detrending methods. Wenanalyze a simple model of economic growth and business cycles in which investment and technical progress are stochastic. The Hodrick-Prescottnand the Baxter-King filter are shown to detect spurious business cycles which are not related to actual cycles in the model. Our results cast doubts on the validity of commonly-accepted stylized business cycle facts. We also discuss the relation of business-cycle dating based on indicators of economic activity, as e.g. applied by the NBER, and the detrending results.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
DDC:330 Economics
Language:English
Date:May 2001
Deposited On:29 Nov 2011 21:26
Last Modified:09 Jul 2012 05:01
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html

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