Essays on transportation and business cycles

The theme of this dissertation is to study the relationship of transportation sector and transportation-related indicators with economy-wide business cycles. It includes four essays, and each of them is a complete academic paper. The internal connection from essay one through essay four follows the sequence: transportation output and business cycles; transportation coincident indicators; transportation leading indicators; in-depth study of the business cycle asymmetry feature of transportation. Essay one develops a monthly output index of the U.S. transportation sector, covering air, rail, water, truck, transit and pipeline activities, and explores its main business cycle properties. The transportations services index (TSI total) matches very well with the annual benchmark series. The strong cyclical movements in the transportation output appear to be more synchronized with the growth slowdowns rather than full-fledged recessions of the U.S. economy. Essay two defines the classical business cycle and growth cycle chronologies for this sector using four coincident indicators representing different aspects of the transportation sector that include an index of transportation output, payroll, personal consumption and employment. 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. Essay three explores the explanatory power of more transportation indicators. We select two sets of leading indicators using various criteria and techniques to predict transportation reference cycles and U.S. business cycles respectively. The new leading index of transportation indicators is equally powerful in predicting the peaks of U.S. business cycles compared with the existing Conference Board composite leading index. Cyclical movements in the new index are much deeper and give clearer signals to the future turning points. Essay four studies the business cycle asymmetry in freight transportation. We find that freight transportation is the aggregate production or economic fluctuations through inventory accumulation or control process in a simple stage-of-fabrication model. Results from these asymmetric model has shown that freight transportation is more predictive to the economic downturns rather than upturns, while inventory cycles are more informative to signaling the economic recoveries instead.