The Hodrick-Prescott filter process is an easy tool to set a baseline for identifying the trend of any economic or financial series and where in the cycle the current set of economic observations sit.
a. Explain how your organization may be able to apply the H-P filter to distinguish cycle from trend in a series such as your top-line revenues or your input costs.
b. How can you apply the H-P approach to counter the tendency to accept a normalization of deviance in a series?
c. How might you use the H-P filter to recognize a change that might be overlooked?