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Pandemic-induced increases in container freight rates: assessing their domestic effects in a globalised world

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  • José Pulido

Abstract

The Covid-19 pandemic severely disrupted the sea transportation industry, leading container freight rates to reach record highs from late 2020 and into 2021. This study examines the welfare effects of this disruption on a specific country, Colombia. For this, I use a quantitative model of international trade with out-of-steady-state transitional dynamics and a rich structure for the organization of production, plus an instrumental variable approach to estimate a trade elasticity to freight. I quantify both the direct effects of freight increases on goods transported to and from Colombia, as well as the indirect impact of heightened rates on routes across the rest of the world. The resulting welfare loss of 1.4% is solely attributable to the direct effects, as the indirect impact simultaneously improves Colombia's relative trade openness, thereby compensating for the effects of the increased shipping costs worldwide.

Suggested Citation

  • José Pulido, 2023. "Pandemic-induced increases in container freight rates: assessing their domestic effects in a globalised world," BIS Working Papers 1132, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1132
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    More about this item

    Keywords

    container freight; transportation costs; international trade; Covid-19;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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