Signaling NBER turning points: a sequential approach

The dates of the U.S. business cycle are reported by the National Bureau of Economic Research with a considerable delay, so an early notion of turning points is of particular interest. This paper proposes a novel sequential classification approach designed for timely signaling these turning points, using the time series of coincident economic indicators. The approach exhibits a range of theoretical optimality properties for early signaling, moreover, it is transparent and easy to implement. The empirical study evaluates the signaling ability of the proposed methodology.