Question: 3 Question A.2 [8 marks]. The Hodrick-Prescott filter computes the non-linear trend {gt}-1 of an economic time series {yt}t_1 by solving: T T-1 min [(yt

Question A.2 [8 marks]. The Hodrick-Prescott filter computes the non-linear trend {gt}-1 of an economic time series {yt}t_1 by solving: T T-1 min [(yt - gt)2 + x _ [(9t+1 - gt) - (gt - gt-1)]2 {gt }t=1 t =1 t= 2 How does an increase in 1 affect the behaviour of the cyclical component of yt? Explain

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