ABSTRACT
The freight rate is a representative variable in the shipping market and is characterized by a cyclical re-lationship. Even though downturns in the shipping market, such as the shipping industry recession in the 1980s, the global financial crisis in 2008 and COVID-19 crisis in 2020, recur, few studies have analyzed the dynamic relationship between supply and demand in terms of its effect on freight rates. Thus, this study classifies the factors affecting fluctuations in dry cargo freight rates into demand, supply, and freight rate specific demand factors, which play the most important role in managing risk in the shipping market. Based on the recursive structural vector autoregressive (recursive SVAR) model, we analyze the historical con-tributions of the effects of each factor across different time periods. Two main findings are summarized as follows: first, we identify the dynamic relationship between factors affecting BDI in the shipping market, and reveal that the magnitude and direction of factors are different. Second, we verify that in an extreme situation in which freight rates exceed the normal range, the market is overheated, and freight rates are therefore determined by the freight rate specific demand of market participants rather than by the actual supply and demand.(c) 2023 The Authors. Production and hosting by Elsevier B.V. on behalf of The Korean Association of Shipping and Logistics, Inc. This is an open access article under the CC BY-NC-ND license (http://creative-commons.org/licenses/by-nc-nd/4.0/).
ABSTRACT
This paper investigates the effects of the coronavirus disease 2019 (COVID-19) cases in the US on the S&P 500 Index using daily data covering the period between 21st January, 2020 and 10th August, 2021. The investigation is achieved by using a structural vector autoregression model, where a measure of the global economic activity and the spread between 10-year treasury constant maturity and the federal funds rate are also included. The empirical results suggest that having (Formula presented.) of an increase in cumulative daily COVID-19 cases in the US results in about (Formula presented.) of a cumulative reduction in the S&P 500 Index after 1 day and about (Formula presented.) of a reduction after 1 week. Historical decomposition of the S&P 500 Index further suggests that the negative effects of COVID-19 cases in the US on the S&P 500 Index have been mostly observed during March 2020. © 2021 Informa UK Limited, trading as Taylor & Francis Group.
ABSTRACT
The freight rate is a representative variable in the shipping market and is characterized by a cyclical relationship. Even though downturns in the shipping market, such as the shipping industry recession in the 1980s, the global financial crisis in 2008 and COVID-19 crisis in 2020, recur, few studies have analyzed the dynamic relationship between supply and demand in terms of its effect on freight rates. Thus, this study classifies the factors affecting fluctuations in dry cargo freight rates into demand, supply, and freight rate specific demand factors, which play the most important role in managing risk in the shipping market. Based on the recursive structural vector autoregressive (recursive SVAR) model, we analyze the historical contributions of the effects of each factor across different time periods. Two main findings are summarized as follows: first, we identify the dynamic relationship between factors affecting BDI in the shipping market, and reveal that the magnitude and direction of factors are different. Second, we verify that in an extreme situation in which freight rates exceed the normal range, the market is overheated, and freight rates are therefore determined by the freight rate specific demand of market participants rather than by the actual supply and demand.
ABSTRACT
Using daily data on the coronavirus disease 2019 (COVID-19) cases from China and the rest of the world, this paper investigates the corresponding effects on the global economic activity. The empirical results based on a structural vector autoregression model using crude oil prices (COP) and the Baltic Exchange Dry Index (BDI) are consistent with increases in COVID-19 cases acting as negative demand shocks in the global economic activity (reflected as reductions in COP) and negative supply shocks in the global transportation of commodities (reflected as increases in BDI). The historical decomposition results further suggest that the effects of COVID-19 cases on COP and BDI have been mostly observed in the early COVID-19 period.