Some Thoughts Elicited by Reading Some Calibration Papers
Menzie Chinn (November 5th, 2009) Writes:
(Warning: Might be considered "wonky" by some) In many economic analyses, one wants to isolate the "business cycle" component of macroeconomic series. Here is one such series, which has had a detrending technique applied to it. Try to guess what it is.
Figure 1
The above series is the Hodrick-Prescott filtered net exports to GDP series for the United States. (I've discussed the HP filter in the context of output gaps before [1].) If one believes that the HP filter properly identifies the cyclical versus trend components, then the plot shows the cyclical component of net exports; hence in this context cyclical net exports were in rough balance in 2007.
Of course, this series is much different than the one we are accustomed to. I plot the filtered and actual series in Figure 2.
Figure 2: Net exports to GDP ratio ...


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Figure 1: Log nonfarm payroll employment (blue, left scale) and log real GDP (red, right scale). NBER defined recession dates shaded gray, assumes last recession ends at 2009Q2. Source: BEA 2009Q3 advance release, and BLS via FREDII.
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Figure 1: GDP growth and contributions to growth of GDP, in ppts; GDP (black), consumpion (red), fixed investment (green), inventory investment (orange), government consumption (purple), and net exports (light brown). Non-shaded area denotes 2009Q3 advance release. Source: BEA, 2009Q3 advance release, October 29, 2009.
Figure 1: Commodity price indices for energy (blue), food (red), agricultural raw materials (green), metals (black) and beverages (teal). NBER defined recession shaded gray, assuming recession ends in 2009M06. Source: IMF, World Economic Outlook (October 2009), data for 