Sequential Methodology for Signaling Business Cycle Turning Points


  • Golosnoy
  • V.
  • Boysen-Hogrefe
  • J.

The dates of U.S. business cycle are reported by NBER with a considerable delay, so an early notion of turning points is of particular interest. This paper proposes a novel sequential approach designed for timely signaling these turning points. A directional cumulated sum decision rule is adapted for the purpose of on-line monitoring of transitions between subsequent phases of economic activity. The introduced procedure shows a sound detection ability for business cycle peaks and troughs compared to the established dynamic factor Markov switching methodology. It exhibits a range of theoretical optimality properties for early signaling, moreover, it is transparent and easy to implement.

Experte IfW Kiel


JEL Classification
C44, C50, E32


  • business cycle