Approach to Estimating Confidence Intervals for a Business Cycle

This document introduces a novel business-cycle turning-point analysis method that leverages the nonparametric coincident profile tool to construct confidence intervals for turning-point dates. The novel method generalized the coincident profile tool by providing a matrix of coincident relationships among a set of variables. We refer to this object as the coincident matrix. Through a numerical study and two empirical applications: one using economic data from the United States and the other from Colombia, we demonstrate the accuracy of the method in identifying turning points, closely aligning with the reference cycle in each case. In addition, in our analysis of United States economic data, we conduct a pseudo-out-of-sample analysis that further validates the method's superior performance in predicting turning-point dates.