Potential output figures are important ingredients of many macroeconomic modelsand are routinely applied by policy makers and global agencies. Despite itswidespread use, estimation of potential output is at best uncertain and dependsheavily on the model. The task of estimating potential output...

The Hodrick-Prescott (HP) filter is a commonly used method, particularly in potential output studies. However its suitability depends on a number of conditions. Very small open economies do not satisfy these as their macroeconomic series exhibit pronounced trends, large fluctuations and...

Modern economics assumes that in the long run an economy develops in a balanced way, with full employment of resources and a constant inflation rate. The output level thereby achieved is called „potential output‟. Knowing the extent of the output gap, or the deviation from this equilibrium,...

Hamilton (2018) argues that one should never use the Hodrick-Prescott (HP) filter to detrend economic time series and proposes an alternative approach. This comment reconsiders Hamilton's case against the HP filter, emphasizing two simple points. First, in the empirical example Hamilton...

Hamilton (2018) argues that one should never use the Hodrick-Prescott (HP) filter to detrend economic time series and proposes an alternative approach. This comment reconsiders Hamilton's case against the HP filter, emphasizing two simple points. First, in the empirical example Hamilton...

The main contribution of this paper is the construction of a metric based on optimal filtering for measuring the distortionary effect of filters. The Hodrick-Prescott filter (HP-filter) has been critizised for inducing spurious cycles when filtering macroeconomic time series with the "typical...