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The Holt-Winters filter and the one-sided HP filter: A close correspondence

Author

Listed:
  • Rodrigo Alfaro
  • Mathias Drehmann
Abstract
We show that the trend of the one-sided HP filter can be asymptotically approx-imated by the Holt-Winters (HW) filter. The later is an elegant, moving average representation and facilitates the computation of trends tremendously. We confirm the accuracy of this approximation empirically by comparing the one-sided HP filter with the HW filter for generating credit-to-GDP gaps. We find negligible differences, most of them concentrated at the beginning of the sample.

Suggested Citation

  • Rodrigo Alfaro & Mathias Drehmann, 2022. "The Holt-Winters filter and the one-sided HP filter: A close correspondence," BIS Working Papers 1033, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1033
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    References listed on IDEAS

    as
    1. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    2. Claudio Borio & Philip Lowe, 2002. "Assessing the risk of banking crises," BIS Quarterly Review, Bank for International Settlements, December.
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    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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