Measuring business cycles: a wavelet analysis of economic time series

Multiresolution wavelet analysis is a natural way to decompose economic time series into components of various frequencies: long-run trend, business-cycle component, and high frequency noise. This paper illustrates the method on real GNP and inflation. The business-cycle component of the wavelet-filtered series closely resembles the series filtered by the approximate bandpass filter (Baxter and King 1999)