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Prepared by Leandro Medina (WHD).
Following extensive literature, the adjustment of the sensitivity of the trend to short-term fluctuations is achieved by modifying a multiplier λ as standard in the literature λ =1600 for quarterly data.
In order to address the end-of-sample bias, data on quarterly projections for 2010–11 were considered when running the filter (8 leads and lags). Excluding projections does not change significantly the estimates of potential growth during the two periods. Default ranges are chosen (6–32 cycle periods).
In this case p refers to the number of autoregressive lags, d refers to the order of integration, and q gives the number of moving average lags.
Non-accelerating Inflation Rate of Unemployment, and refers to a level of unemployment below which inflation rises.
The SVAR estimation uses 5 lags for the endogenous variables, as indicated by the Akaike Information Criterion (AIC) and the Final Prediction Error (FPE) Criterion.
The solid line represents the response to one unit innovation in World GDP growth. Dotted lines reflect two-standard deviation bands.