mFilter (version 0.1-5)

bwfilter: Butterworth filter of a time series

Description

Filters a time series using the Butterworth square-wave highpass filter described in Pollock (2000).

Usage

bwfilter(x,freq=NULL,nfix=NULL,drift=FALSE)

Arguments

x

a regular time series

nfix

sets the order of the filter. The default is nfix=2, when nfix=NULL.

freq

integer, the cut-off frequency of the Butterworth filter. The default is trunc(2.5*frequency(x)).

drift

logical, FALSE if no drift in time series (default), TRUE if drift in time series.

Value

A "mFilter" object (see mFilter).

Details

Almost all filters in this package can be put into the following framework. Given a time series \(\{x_t\}^T_{t=1}\) we are interested in isolating component of \(x_t\), denoted \(y_t\) with period of oscillations between \(p_l\) and \(p_u\), where \(2 \le p_l < p_u < \infty\).

Consider the following decomposition of the time series $$x_t = y_t + \bar{x}_t$$ The component \(y_t\) is assumed to have power only in the frequencies in the interval \(\{(a,b) \cup (-a,-b)\} \in (-\pi, \pi)\). \(a\) and \(b\) are related to \(p_l\) and \(p_u\) by $$a=\frac{2 \pi}{p_u}\ \ \ \ \ {b=\frac{2 \pi}{p_l}}$$

If infinite amount of data is available, then we can use the ideal bandpass filter $$y_t = B(L)x_t$$ where the filter, \(B(L)\), is given in terms of the lag operator \(L\) and defined as $$B(L) = \sum^\infty_{j=-\infty} B_j L^j, \ \ \ L^k x_t = x_{t-k}$$ The ideal bandpass filter weights are given by $$B_j = \frac{\sin(jb)-\sin(ja)}{\pi j}$$ $$B_0=\frac{b-a}{\pi}$$

The digital version of the Butterworth highpass filter is described by the rational polynomial expression (the filter's z-transform) $$\frac{\lambda(1-z)^n(1-z^{-1})^n}{(1+z)^n(1+z^{-1})^n+\lambda(1-z)^n(1-z^{-1})^n}$$ The time domain version can be obtained by substituting \(z\) for the lag operator \(L\).

Pollock derives a specialized finite-sample version of the Butterworth filter on the basis of signal extraction theory. Let \(s_t\) be the trend and \(c_t\) cyclical component of \(y_t\), then these components are extracted as $$y_t=s_t+c_t=\frac{(1+L)^n}{(1-L)^d}\nu_t+(1-L)^{n-d}\varepsilon_t$$ where \(\nu_t \sim N(0,\sigma_\nu^2)\) and \(\varepsilon_t \sim N(0,\sigma_\varepsilon^2)\).

If drift=TRUE the drift adjusted series is obtained as $$\tilde{x}_{t}=x_t-t\left(\frac{x_{T}-x_{1}}{T-1}\right), \ \ t=0,1,\dots,T-1$$ where \(\tilde{x}_{t}\) is the undrifted series.

References

M. Baxter and R.G. King. Measuring business cycles: Approximate bandpass filters. The Review of Economics and Statistics, 81(4):575-93, 1999.

L. Christiano and T.J. Fitzgerald. The bandpass filter. International Economic Review, 44(2):435-65, 2003.

J. D. Hamilton. Time series analysis. Princeton, 1994.

R.J. Hodrick and E.C. Prescott. Postwar US business cycles: an empirical investigation. Journal of Money, Credit, and Banking, 29(1):1-16, 1997.

R.G. King and S.T. Rebelo. Low frequency filtering and real business cycles. Journal of Economic Dynamics and Control, 17(1-2):207-31, 1993.

D.S.G. Pollock. Trend estimation and de-trending via rational square-wave filters. Journal of Econometrics, 99:317-334, 2000.

See Also

mFilter, hpfilter, cffilter, bkfilter, trfilter

Examples

# NOT RUN {
## library(mFilter)

data(unemp)

opar <- par(no.readonly=TRUE)

unemp.bw <- bwfilter(unemp)
plot(unemp.bw)
unemp.bw1 <- bwfilter(unemp, drift=TRUE)
unemp.bw2 <- bwfilter(unemp, freq=8,drift=TRUE)
unemp.bw3 <- bwfilter(unemp, freq=10, nfix=3, drift=TRUE)
unemp.bw4 <- bwfilter(unemp, freq=10, nfix=4, drift=TRUE)

par(mfrow=c(2,1),mar=c(3,3,2,1),cex=.8)
plot(unemp.bw1$x,
     main="Butterworth filter of unemployment: Trend,
     drift=TRUE",col=1, ylab="")
lines(unemp.bw1$trend,col=2)
lines(unemp.bw2$trend,col=3)
lines(unemp.bw3$trend,col=4)
lines(unemp.bw4$trend,col=5)
legend("topleft",legend=c("series", "freq=10, nfix=2",
       "freq=8, nfix=2", "freq=10, nfix=3", "freq=10, nfix=4"),
       col=1:5, lty=rep(1,5), ncol=1)

plot(unemp.bw1$cycle,
     main="Butterworth filter of unemployment: Cycle,drift=TRUE",
     col=2, ylab="", ylim=range(unemp.bw3$cycle,na.rm=TRUE))
lines(unemp.bw2$cycle,col=3)
lines(unemp.bw3$cycle,col=4)
lines(unemp.bw4$cycle,col=5)
## legend("topleft",legend=c("series", "freq=10, nfix=2", "freq=8,
## nfix=2", "freq## =10, nfix=3", "freq=10, nfix=4"), col=1:5,
## lty=rep(1,5), ncol=1)

par(opar)
# }