WlLUAM L HUTH Northeast Louisiana University A Quantitative Look at the System of Economic Indicators* The Bureau of Economic Analysis (BEA) regularly publishes data on the current state and anticipated future of the domestic economy. This information is frequently used, mainly in a qualitative sense, by policymakers and other economic agents to assess the direction of economic activity. This paper examines the quantitative time interrelationships between the composite economic indicators. Specifically, cross- correlations were computed from the white noise innovations from univariate AR- IMA models and used to isolate the delay behavior and directional relation between the series pairs. The correlations were also used to specify a multivariate time series model connecting the coincident and leading indexes of economic activity. 1. Introduction The Bureau of Economic Analysis (BEA) regularly publishes current and historical data on a set of economic indicators in the Business Conditions Digest (BCD). The indicators have certainly passed through their incunabula and are now considered quite im- portant and influential in that they provide, inherently, qualitative information to decision-making units in the economy. The indicator system attempts to provide an empirical insight into the short-term dynamics of cyclic economic activity and, as such, is certainly in- fluential in the expectations formation process [see Auerbach (1982)]. The present form of the system is an aggregation of effort that began with the seminal studies of empirical business cycles by Mitchell (1927), Burns and Mitchell (1946), and Moore (1961) and has evolved through the continued efforts of Shiskin and Moore (1968), Moore (1969), Zarnowitz and Boschan (1975), Moore (1980), and Klein and Moore (1983). The broadest measures in the system are the composites which include both the coincident and leading indexes of economic activity and other aggregate measures that re- flect marginal employment adjustments, capital investment com- mitments, inventory investment and purchasing, profitability, and *A debt of gratitude is owed to the anonymous referees for their comments and suggestions and to Northeastern University, Boston, where a major portion of the research took place. Journal of Macroeconomics, Spring 1985, Vol. 7, No. 2, pp. 195-210 Copyright 9 1985 by Wayne State University Press. 195