The effects of geopolitical risk and economic policy uncertainty on dry bulk shipping freight rates

We examine the effects of geopolitical risk and economic policy uncertainty on shipping freight rates using a Bayesian VAR model

Wolfgang Drobetz; Konstantinos Gavriilidis; Styliani-Iris Krokida; Dimitris Tsouknidis

2020

Scholarcy highlights

  • Shipping freight rates are linked tightly to the global real economic activity and the global demand for commodities
  • We examine the effects of geopolitical risk and economic policy uncertainty on shipping freight rates using a Bayesian VAR model
  • Positive shocks to EPU indices for the U.S, Brazil, and China trigger a negative response of dry bulk shipping freight rates that builds gradually over several months
  • Positive shocks on the GPR indices of Brazil and China trigger responses on all freight rates that are smaller in magnitude and weaker in terms of statistical significance
  • This study contributes to the literature by quantifying the effects of geopolitical risk and economic policy uncertainty on shipping freight rates, a key indicator variable of global trade
  • Our results reveal that the effects of positive shocks on EPU and GPR on shipping freight rates can differ dramatically
  • These findings have important economic and managerial policy implications for players in the global shipping industry

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