METHOD-OF-MOMENTS MEASUREMENT OF UK BUSINESS CYCLES

This paper illustrates measuring the UK business cycle (detrending)by extracting the component of aggregate output which has momentswhich most closely match those from business-cycle models. Amember of a parametric family of detrending filters (which includeslinear detrending and first differencing as special cases) isselected by the generalized method of moments. Illustrationsuse moments from (i) a fully calibrated, real business cyclemodel and (ii) business-cycle indicators. Measured cycles arecompared to those resulting from HP filtering and to the CSO'sreference cycle.