Exercise 7.2

HP-Filtered Terms-Of-Trade Process

⬅ Return

Problem

Use the HP filler with smoothing parameter \(\lambda=100\) to obtain the cyclical component of the terms of trade for the 51 countries considered in Section 7.1. See Section 1.5 of Chapter 1 for a discussion of the HP filter. Then estimate equation (7.1) country by country. Report your findings in a format similar to Table 7.1. Compare the estimated process under quadratic and HP detrending.

Answer

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