20.04 Finn E. Kydland and Edward C. Prescott

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2004 Finn E. Kydland and Edward C. Prescott "for their contributions to dynamic macroeconomics: the time consistency of economic policy and the driving forces behind business cycles" One traditional method, pioneered by the Nobel-winning macroeconomist Ed Prescott, is called the Hodrick-Prescott Filter, or H-P Filter. Basically, an economist just picks a time horizon -- say, three months, or five years, or 20 years -- that he thinks represents the business cycle, and the H-P Filter will separate the squiggly line into a cycle and a trend(Smith, 2014). References Smith, Noah (2014: Maybe There's No Such Thing as a Business Cycle. http://www.bloombergview.com/articles/2014-12-18/maybe-theres-no-such-thing-as-a-business-cycle [Accessed 15 September 2015].