Freight market, Commodities, Granger causality, Impulse Response analysis, Shipping


This paper provides statistical evidence in support of the view, widely held in the dry industry, that there is a lead-lag relationship between Chinese steel production and dry bulk freight rates. Furthermore, this raises an important question about the direction of their relationship. Despite the plethora of studies on micro and macro economic determinants of freight rates, there have been no studies addressing these issues. Hence, this paper undertakes such an investigation using Co-integration analysis, VAR based Granger Causality tests and Impulse Response analysis. Another contribution is that we apply our methodology separately to the spot and period freight markets, and empirically examine and analyze the differences among the causal relationships of four different vessel categories. The results are generally in line with industry expectations and contribute to the understanding of commodity and freight market movements.

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