A novel business cycle indicator of the Korean shipping industry

Abstract

The aim of this study is to construct monthly coincident and leading composite indicators for the shipping industry in Korea. The coincident and the leading indicators are computed using the generalized dynamic factor model. We use the production index of the water transport industry as the reference variable and compute the coincident indicator based on the common component of eight economic indicators. The analysis shows that the Korean shipping industry went through four business cycles during the sample period from 2007M1 to 2021M5. The leading indicator provides early signals of turning points in business cycles with a high correlation. The results suggest that the business cycle indicators present in this study may be useful diagnostic tools for understanding the timely and frequent economic state of the Korean shipping industry and its likely development in the near future.

Keywords

• Business cycle
• Coincident indicator
• Composite indicator
• Cyclical fluctuation characteristics
• Cyclical turning points
• Generalized dynamic factor model