Forecasting Cycles in the Transportation Sector

The purpose of this paper is to develop a method for predicting fluctuations in the transportation sector using leading indicators. From twenty-five initial candidates, we select seven leading indicators using various screening techniques and modern time series models. A composite leading index is constructed and found to perform well in predicting their reference cycles. The leading index signals downturns in the transportation sector by 9 months and upturns by 6 months, on average. The former predicted the latest recession in transportation 20 months ahead. We also confirm the predictive contents of the CLI in relation to transportation growth cycles. These evaluation criteria ensure accurate forecasts of the general state of the transportation sector in a timely fashion.

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