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Role Of Interest Rates On Fleet Capacity Adjustment Decisions Of Shipowners

Author

Listed:
  • Abdullah AÇIK

    (Dokuz Eylül University, Maritime Faculty)

  • Hüseyin İshak Halil KESİKTAŞ

    (Dokuz Eylül University, Maritime Faculty)

  • Sadık Özlen BAŞER

    (Dokuz Eylül University, Maritime Faculty)

Abstract

The aim of this study is to empirically examine the impact of real interest rate on global fleet adjustment processes by modelling new orders and demolitions. The data set used consists of 34 annual observations and covers the years between 1985 and 2018. According to the results, the freight rate has a positive impact on amount of new ship orders and a negative impact on amount of ships scrapped, while the real interest rate has a negative impact on both amount of new ship orders and ships scrapped. The impact of freight rate on new ship orders and demolitions is clear whereas the impact of the real interest rate may be explained by two reasons. Increasing capital costs due to increasing interest rates may cause decrease in both new orders and demolitions as ordering new ships becomes more expensive. The second one may be related to expectations of ship investors to gain more revenue by evaluating their capitals on higher interest rates instead of ordering new ships. Therefore, it is important to limit negative impact of high interest rates by various policies so that maritime transport sector can contribute to economic growth by facilitating trade with sustainable costs.

Suggested Citation

  • Abdullah AÇIK & Hüseyin İshak Halil KESİKTAŞ & Sadık Özlen BAŞER, 2020. "Role Of Interest Rates On Fleet Capacity Adjustment Decisions Of Shipowners," Journal of Research in Economics, Politics & Finance, Ersan ERSOY, vol. 5(1), pages 66-80.
    • Handle: RePEc:ahs:journl:v:5:y:2020:i:1:p:66-80
    DOI: 10.30784/epfad.642061
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    References listed on IDEAS

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    1. Journal of Economics Library, 2015. "New Economics Books," Journal of Economics Library, KSP Journals, vol. 2(4), pages 380-426, December.
    2. Journal of Economics Library, 2015. "New Economics Books," Journal of Economics Library, KSP Journals, vol. 2(3), pages 214-284, September.
    3. Alizadeh, Amir H. & Strandenes, Siri Pettersen & Thanopoulou, Helen, 2016. "Capacity retirement in the dry bulk market: A vessel based logit model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 92(C), pages 28-42.
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    Cited by:

    1. Abdullah Açık & Özhan Okutucu & Kamil Özden Efes & Sadık Özlen Başer, 2021. "Analyzing the Impact of Interest Rate on Dry Bulk Freight Market with Time-Varying Causality Method," Journal of Research in Economics, Politics & Finance, Ersan ERSOY, vol. 6(2), pages 403-417.

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    More about this item

    Keywords

    Interest Rate; Ship Investment; Demolition.;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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