Chapter 2 Composite Coincident Index of the Transportation Sector and Its Linkages to the Economy

Abstract

Transportation plays a central role in facilitating economic activities across sectors and between regions and thus should be essential to business cycle research. In this chapter, we identify four coincident indicators representing different aspects of the transportation sector. Foremost among them is the index of transportation services output (TSI) presented in the previous chapter. Following the long-standing methodology of National Bureau of Economic Research (NBER) business cycle research, the other three indicators that we include are payroll, personal consumption and employment – all pertaining to the transportation sector. Using a composite of the four indicators, we define the classical business cycle and growth cycle chronologies for the transportation sector. We find that, relative to the economy, business cycles in the transportation sector have an average lead of nearly 6 months at peaks and an average lag of 2 months at troughs. Similar to transportation business cycles, growth slowdowns in this sector also last longer than the economy-wide slowdowns by a few months. This study underscores the importance of transportation indicators in monitoring cyclical movements in the aggregate economy.

Citation

Lahiri, K. (2010), "Chapter 2 Composite Coincident Index of the Transportation Sector and Its Linkages to the Economy", Lahiri, K. (Ed.) Transportation Indicators and Business Cycles (Contributions to Economic Analysis, Vol. 289), Emerald Group Publishing Limited, Leeds, pp. 39-56. https://doi.org/10.1108/S0573-8555(2010)0000289004