A Directional Relationship Between Freight and Newbuilding Markets: A Panel Analysis

This article examines the dynamic relationship between international sea freight rate and newbuilding price by employing panel cointegration testing and estimating techniques. The main question addressed is whether the goods (new ships) price and service (sea freight) rate lead or lag one another in a Granger-cause sense, or simultaneously move together. Monthly panel data on 3 different bulk shipping market segments from 1998–2009 is used in empirical analysis. Various panel unit root tests show that the data variables are integrated with unit roots, whereas panel cointegration techniques are used to estimate the dynamic relationship. A positive directional relationship from freight rate to newbuilding price is found, and freight rate is more sensitive to market changes than newbuilding price. The results indicate that investment in new ships is encouraged by a strong freight market.

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  • Authors:
    • Xu, Jane Jing
    • Yip, Tsz Leung
    • Liu, Liming
  • Publication Date: 2011-3

Language

  • English

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Filing Info

  • Accession Number: 01333579
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Mar 21 2011 2:14PM