DETRENDING AND TURNING-POINTS

This paper examines the sensitivity of turning points classification t o different detrending methods and the ability of each method to repli cate NBER dating. We use two different turning point rules and a varie ty of detrending methods to compute the cyclical component of output. We show that while differences are minor with the first rule, the resu lts are extremely sensitive to detrending with the second rule. Many d etrending procedures generate false alarms and many miss several commo nly classified turning points. The output series detrended with the Ho drick and Prescott filter and with a frequency domain masking of the l ow frequency components of the series reproduce all NBER turning point s with at most two quarters lead or lag, regardless of the dating rule used.