Adjusting the HP-filter for the frequency of observations

Ravn, M and Uhlig, H (2001) Adjusting the HP-filter for the frequency of observations. Working Paper. London Business School Economics Discussion Paper Series.

Abstract

This paper studies how the HPFilter should be adjusted, when changing the frequency of observations. It complements the results of Baxter and King (1999) with an analytical analysis, demonstrating that the filter parameter should be adjusted by multiplying it with the fourth power of the observation frequency ratios. This yields an HP parameter value of 6.25 for annual data given a value of 1600 for quarterly data. The relevance of the suggestion is illustrated empirically.