Australian Bureau of Statistics

Rate the ABS website
ABS Home > Statistics > By Catalogue Number
ABS @ Facebook ABS @ Twitter ABS RSS ABS Email notification service
1352.0.55.085 - Research Paper: Estimating the Cyclical Component from Annual Time Series (Methodology Advisory Committee), Jun 2007  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 23/08/2007  First Issue
   Page tools: Print Print Page Print all pages in this productPrint All RSS Feed RSS Bookmark and Share Search this Product
  • About this Release

When analysing an economic data series, we look for underlying patterns to isolate areas of interest and exclude elements that are not closely related to our interests. The ABS currently uses an 11-term Henderson filter as the detrending method to separate out the long-term trend and cyclical components within Australian multifactor productivity (MFP).

This paper investigates what are the appropriate statistical methods to extract the cyclical component for annual time series using desirable frequency properties and model fitness in the time domain. As a case study, rather than using structural economic modelling techniques, we apply several commonly used filters to the annual MFP series and evaluate their performance. We conclude that care has to be taken in order to use different methods in relation to their frequency properties, and the volatility level of the series under study.

As result of this investigation and with considerations of stability, revisions and comparability, the customised Hodrick-Prescott filter with a smoothing parameter of 25 appears to perform better than other methods in extracting the MFP cycle. Nonetheless, there remain several statistical challenges to overcome. The methodology presented in this paper paves the way to formalise a general approach to cycle extraction which can be extended to other ABS annual time series.


Bookmark and Share. Opens in a new window

Commonwealth of Australia 2014

Unless otherwise noted, content on this website is licensed under a Creative Commons Attribution 2.5 Australia Licence together with any terms, conditions and exclusions as set out in the website Copyright notice. For permission to do anything beyond the scope of this licence and copyright terms contact us.