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Using HP w/ a non constant smoothing parameter lambda

Using HP w/ a non constant smoothing parameter lambda
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By jaguar1637 3731 days ago

The Hodrick-Prescott filter and the problem (mathematical improvment)

The output gap as a measure of economic activity or “excess demand” is the difference between
actual and potential output. Theoretically, the current output gap should provide information
regarding future inflation. The construction of the output gap is difficult because, among many
other problems, potential output is an unobserved variable