Page - 81 - in The Austrian Business Cycle in the European Context

81 of business cycle studies where the most recent time margin is not in the focus of interest. They directly pay attention to the frequen- cies which are regarded as the business cycle in the sense of Burns - Mitchell ( 1946). Applying a band-pass filter, a researcher explic- itly determines what he or she regards as the business cycle. For the present study, a frequency window ranging from 6 to 32 quar- ters is regarded as containing the business cycle. All cycles shorter than l ½ years and longer than 8 years are filtered out. Compared with the HP filter, the resulting time series carries less noise (due to the leakage problem discussed earlier, there still remains a small amount of high-frequency variation depending on the size of the filter) and also the problem of extracting spurious cycles - as put forward by Aaland (2005) - is reduced. Furthermore, as this filter is symmetric, no phase shift is introduced, but the end-of-sample problem remains. As the aim of this study is not to date the cycle in real time, but to present a robust dating of past cycles, 6 quarters at each end of the series are sacrificed in order to make the filter work very exactly and thereby to reduce the leakage problem. The band-pass filter proposed by Cristiano -Fitzgerald (2003) is not considered in this study. While this filter serves as a good alterna- tive to the Baxter-King filter close to either end of the series, it will hardly offer an improvement within the series, and the weighting scheme is more transparent in the case of the Baxter-King filter. The Beveridge-Nelson decomposition has not been applied, due to its theoretical shortcomings. All shocks influence the trend and the cycle at the same time, which does not seem to be a plausi- ble concept for the largest part of shocks. Furthermore, this method has low power in discriminating between different mod- els; therefore this lack of robustness makes it a poor guide to check the robustness across different methods. Despite the fact that unobserved-components models of a specific structure show some interesting features, they are not considered here either. Again, the large number of possibilities to model the different economic time series components, allow no clear-cut statement about this approach in comparison with others. Results of this method depend more on the capabilities and personal judge-