Question: Question A.2 [8 marks]. The Hodrick-Prescott filter computes the non-linear trend {gt}t=1T of an economic time series {yt}t=1T by solving: min{gt}t=1T{t=1T(ytgt)2+t=2T1[(gt+1gt)(gtgt1)]2}. How does an increase

Question A.2 [8 marks]. The Hodrick-Prescott filter computes the non-linear trend

Question A.2 [8 marks]. The Hodrick-Prescott filter computes the non-linear trend {gt}t=1T of an economic time series {yt}t=1T by solving: min{gt}t=1T{t=1T(ytgt)2+t=2T1[(gt+1gt)(gtgt1)]2}. How does an increase in affect the behaviour of the cyclical component of yt ? Explain

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