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 moments which most closely match those from business-cycle models. A member of a par ametric family of detrending filters (which includes linear detrending and first differencing as special cases) is selected by the generaliz ed method of moments. Illustrations use moments from (i) a fully calib rated, real business cycle model and (ii) business-cycle indicators. M easured cycles are compared to those resulting from PIP filtering and to the CSO's reference cycle.