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

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

Abstract

We examine the effects of geopolitical risk (GPR) and economic policy uncertainty (EPU) on shipping freight rates using a Bayesian VAR model. A positive shock to global GPR has an immediate positive, but gradually diminishing, effect on dry bulk shipping freight rates. This effect is driven by global rather than country-specific GPR shocks. 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. Historical cumulative effects of both GPR and EPU shocks on freight rates can be large and of different signs during different subperiods. Our results are important for both shipowners and charterers when fixing chartering strategies and prioritizing investments in newbuilding or second-hand vessels.

Suggested Citation

  • Wolfgang Drobetz & Konstantinos Gavriilidis & Styliani-Iris Krokida & Dimitris Tsouknidis, 2021. "The effects of geopolitical risk and economic policy uncertainty on dry bulk shipping freight rates," Applied Economics, Taylor & Francis Journals, vol. 53(19), pages 2218-2229, April.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:19:p:2218-2229
    DOI: 10.1080/00036846.2020.1857329
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    Cited by:

    1. Zhao, Chuan & Guo, Qidong & Dong, Kangyin & Mo, Lipo, 2024. "Multi-scenario analyses for antitrust immunity policies on shipping alliances: A dynamic tripartite evolutionary game perspective," Transportation Research Part A: Policy and Practice, Elsevier, vol. 179(C).
    2. Panos K. Pouliasis & Christos Bentsos, 2024. "Oil price uncertainty and the relation to tanker shipping," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 2472-2494, April.
    3. Chen, Yanhui & Zhou, Xiaoyu & Chen, Shun & Mi, Jackson Jinhong, 2024. "LNG freight rate and LNG price, carbon price, geopolitical risk: A dynamic connectedness analysis," Energy, Elsevier, vol. 302(C).
    4. Gu, Bingmei & Liu, Jiaguo, 2022. "Determinants of dry bulk shipping freight rates: Considering Chinese manufacturing industry and economic policy uncertainty," Transport Policy, Elsevier, vol. 129(C), pages 66-77.

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