Second look at 20-year trend RGDP growth

Following up on yesterday's look at 20-year RGDP growth rates. Here's yesterday's graph:

Graph #1: 20-Year Trend RGDP Growth (140% more in 1820 than in 1800, etc.)

I took Real GDP in millions (from MeasuringWorth), put a Hodrick-Prescott on it with a lot of smoothing, and looked at growth of the smoothed data relative to 20 years before. It definitely does not show a straight-line trend of growth. And if you take the wavy blue line and put a straight line trend on it, that overall trend is clearly downhill.

In order to get a better idea what I was doing, I took that graph and put a second line on there to show the 20-year growth path of Real GDP without smoothing:

Graph #2: 20-year Growth of RGDP, Smoothed (blue) and Not (red)

Looks like the blue line is on fire.

That's an awfully jagged sawtooth. The blue does perhaps too much smoothing? But no, I don't think so. The red shows 20-year changes in Real GDP. You would expect the differences to be large. But the blue line doesn't smooth out those large jaggies. The blue line smooths out the much smaller year-to-year jiggies in RGDP.

(A jiggie is a small jaggie. A jaggie is a large jiggie. Apparently.)

Actually the Hodrick-Prescott calculation smooths out the relatively small disturbances in the RGDP data. And then the blue line takes the smoothed information and looks at 20-year changes in it. So I don't really think the blue line is overly smoothed.

I did use a much larger smoothing constant than you would normally use for annual data. But nowhere near the 400,000 that these guys used.

Part 2 of 4