I see that in research papers their authors usually apply the HP filter with ln(GDP) instead of GDP at level, in order to find out business cycles.
Actually thus far I have not understood mathematical implications regarding using the logarithm (How to link to a recession?...). Any explanation in detail is much appreciated.
Use the level or logarithm of GDP in HP filter?
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Re: Use the level or logarithm of GDP in HP filter?
GDP has roughly constant percentage growth over long periods, as opposed to linear growth. Hence the log transformation.
Re: Use the level or logarithm of GDP in HP filter?
Hi startz, what advantage would we have when applying the HP filter to this transformed series?
(You could show me in form of math formulas if feel convenient)
(You could show me in form of math formulas if feel convenient)
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