Page - 135 - in The Austrian Business Cycle in the European Context

135 a basic structure model approach. In order to obtain stationary time series necessary for extracting business cycle fluctuations ac- cording to the deviation cycle approach, they used two consecu- tively applied HP filters119• The following dating procedure was car- ried out by a Markov-switching model. The results for the classical business cycle show that in that case the conventional wisdom of flatter business cycles in the core countries is not supported by the study of Artis - Marcellino - Proi- etti (2004). The steepness as well as the duration of recessions is much higher than those found for Germany, Italy or the euro area as a whole. This leads to bigger losses of output during recessions than in other countries. The picture changes when one looks at the results for the devia- tion cycle approach. For Austria, the authors report an average duration of recessions of around 17 months, which is slightly higher than for Italy (16 months), but considerably lower than for Ger- many (20 months) or the whole euro area (23 months). When we compare these results with those of our study, it can be observed that the results concerning the length of recessions for first-order- differenced autCDE {which comes closest to the definition of in- dustrial production) are much higher, irrespective of whether we concentrate only on the common component included or not. The gap is reduced by looking at HP-filtered series and shows quite similar results for BK-filtered data. This is quite plausible, because Artis - Marcellino - Proietti (2004) employed some kind of band- pass filter. Our HP-filtered series show a duration of economic 119 As the HP-filter belongs to the class of high-pass filters, only low frequencies are filtered out. If two HP-filters with different smoothing properties are applied one af- ter the other, they can work like a band-pass filter. Nevertheless this sort of band- pass filtering works not as exactly as the Baxter-King filter. Especially higher fre- quencies but still within the business cycle frequency band are erroneously filtered out, whereas high frequencies outside the band remain within the series. Therefore, the leakage of this filter is much higher than the Baxter-King filter applied in our study.