Vol. 9 No. 4 (2021): Business & Management Studies: An International Journal
Articles

The impact of economic activities in US on container freight rates: An application on China-USA route

Kamil Özden Efes
Dr., Piri Reis University, İstanbul, Turkey

Published 2021-12-25

How to Cite

Efes, K. Özden. (2021). The impact of economic activities in US on container freight rates: An application on China-USA route. Business &Amp; Management Studies: An International Journal, 9(4), 1599–1610. https://doi.org/10.15295/bmij.v9i4.1958

Abstract

Container shipping is a crucial transportation method for manufactured consumer goods. Seaborne trade and container shipping is highly affected by various factors. Global economic growth, international trade, demand-supply balance in the container shipping market affect the container shipping industry. The global economy is the most critical demand factor. Supply in container shipping is container fleet capacity which is inelastic, and the market cannot respond to sudden demand changes. Therefore, changes on the demand side can rapidly impact freight. This study aims to empirically examine the effect of changes in demand on container shipping freight rates. In the analysis, the impact of the changes in the GDP of the USA, the world's largest economy, on the container freights between the USA and China was examined by the regression analysis method. The research results have determined that the relationship between the variables is positive when the structural breaks are taken into account, and a 1% change in GDP causes a 3.17% change in freight rates. It was also determined that there was a structural break in the model after 2020 Q1 with COVID-19. The findings show how sensitive maritime transport is too large economies and how big this situation poses.

Downloads

Download data is not yet available.

References

  1. Açık, A. (2019). Volatility spillover from global container freight indices to port throughputs in Turkey. Uluslararası Ekonomi ve Yenilik Dergisi, 5(1), 101-113.
  2. Akbulaev, N., & Bayramli, G. (2020). Maritime transport and economic growth: Interconnection and influence (an example of the countries in the Caspian sea coast; Russia, Azerbaijan, Turkmenistan, Kazakhstan and Iran). Marine Policy, 118, 104005.
  3. Alises, A., Vassallo, J. M., & Guzmán, A. F. (2014). Road freight transport decoupling: A comparative analysis between the United Kingdom and Spain. Transport Policy, 32, 186-193.
  4. Alizadeh, A. & Nomikos, N. (2009). Shipping Derivatives and Risk Management. Palgrave Macmillian: USA.
  5. Allen, M. P. (2004). Understanding regression analysis. New York: Springer Science & Business Media.
  6. Archdeacon, T. J. (1994). Correlation and regression analysis: A historian's guide. Univ of Wisconsin Press.
  7. Başer, S. Ö., & Açık, A. (2018). The response of shipbuilding activities to freight rates. Uluslararası İktisadi ve İdari Bilimler Dergisi, 4(1), 120-136.
  8. Başer, S. Ö., & Açık, A. (2019). The effects of global economic growth on dry bulk freight rates. Uluslararası Ticaret ve Ekonomi Araştırmaları Dergisi, 3(1), 1-17.
  9. Benali, N., & Feki, R. (2020). Evaluation of the relationship between freight transport, energy consumption, economic growth and greenhouse gas emissions: The VECM approach. Environment, Development and Sustainability, 22(2), 1039-1049.
  10. Beyzatlar, M.A., Karacal, M. & Yetkiner, H. (2014). Granger-causality between transportation and GDP: A panel data approach Transportation Research Part A: Policy and Practice, 63 (2014), 43-55
  11. Brida J.G., Rodriguez-Brinidis, M.A., Lanzilotta, B. & Rodriguez-Collazo, S. (2016). Testing linearity in the long-run relationship between economic growth and passenger air transport in Mexico. International Jorunal of Transport Economics, XLIII, 437–450
  12. Chatterjee, S. and Hadi, A. S. (2015). Regression analysis by example. New Jersey: John Wiley & Sons.
  13. Chi J (2016) Exchange rate and transport cost sensitivities of bilateral freight flows between the US and China. Transport Research Part A, 89, 1–13
  14. Chistè, C., & Van Vuuren, G. (2014). Investigating the cyclical behaviour of the dry bulk shipping market. Maritime Policy & Management, 41(1), 1-19.
  15. Cowie, J. (2009). The Economics of Transport: A Theoretical and Applied Perspective. Routledge.
  16. Dickey, D. A. and Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American statistical association, 74(366a), 427-431.
  17. Efes, K. Ö., Başer, S. Ö., & Açık, A. (2019). Supply-demand interaction in the formation of freight rates: China’s trade volume as demand side in the dry bulk market. Pomorstvo, 33(1), 46-55.
  18. Engle, R.F. (1982). Autoregressive Conditional Heteroskedasticity with Estimates of the Variance of U.K. Inflation. Econometrica, 50, 987-1008
  19. Esquerdo, P. J. R. and Welc, J. (2018). Applied regression analysis for business. Switzerland: Springer International Publishing.
  20. Fan, L. (2011). Econometric analyses of container shipping market and capacity development. PhD Thesis, The Hong Kong Polytechnic University, Hong Kong.
  21. Fred (2021). Billions of Chained 2012 Dollars. https://fred.stlouisfed.org/series/ND000334Q#0
  22. Gaurav, K. (2011). Multiple regression analysis: Key to social science research. Germany: GRIN Verlag.
  23. Gordon, R. (2015). Regression analysis for the social sciences. New York: Routledge.
  24. Gujarati, D.N. (2004). Basic Econometric, (4th Ed.). New York: The McGraw-Hill Companies
  25. Investing (2021). WTO Crude Oil Prices. URL: https://tr.investing.com/commodities/crude-oil, Accessed 20.06.2021.
  26. Karakitsos, E., & Varnavides, L. (2014). Maritime economics: A macroeconomic approach. Springer.
  27. Keupp, M. M. (2015). The Northern sea route: A comprehensive analysis. Springer Gabler.
  28. Khan, M. Z., & Khan, F. N. (2020). Estimating the demand for rail freight transport in Pakistan: A time series analysis. Journal of Rail Transport Planning & Management, 14, 100176.
  29. Kulshreshtha M, Nag B, Kulshreshtha M. (2001) A multivariate cointegrating vector auto regressive model of freight transport demand: evidence from Indian railways. Transport Research Part A, 35, 29–45
  30. Kveiborg, O., & Fosgerau, M. (2007). Decomposing the decoupling of Danish road freight traffic growth and economic growth. Transport policy, 14(1), 39-48.
  31. Kwiatkowski, D., Phillips, P.C.B., Schmidt, P. & Shin, Y. (1992). Testing the null hypothesis of stationarity against the alternative of a unit root. Journal of Econometrics, 54, 159-178.
  32. Ljung, G. and G. Box (1979). On a Measure of Lack of Fit in Time Series Models. Biometrika, 66, 265–270.
  33. Luo, M., Fan, L., & Liu, L. (2009). An econometric analysis for container shipping market. Maritime Policy & Management, 36(6), 507-523.
  34. Ma, S. (2004). Maritime Economics. Unpublished lecture handout, World Maritime University, Malmö, Sweden
  35. Ma, S. (2020). Economics of Maritime Business. Routledge: New York.
  36. Ma, Y., Zhu, J., Gu, G., & Chen, K. (2020). Freight transportation and economic growth for zones: Sustainability and development strategy in China. Sustainability, 12(24), 10450.
  37. Maparu T.S. & Mazumder, T.N. (2017). Transport infrastructure, economic development and urbanization in India (1990–2011): is there any causal relationship? Transport Research Part A, 100, 319–336
  38. Marazzo M, Scherre R, Fernandes E. (2010) Air transport demand and economic growth in Brazil: a time series analysis. Transport Research Part E, 46(2), 261–269
  39. Michail, N. A. (2020). World economic growth and seaborne trade volume: quantifying the relationship. Transportation Research Interdisciplinary Perspectives, 4, 100108.
  40. Newey, W. & West, K. (1987). A Simple Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix. Econometrica, 55, 703–708.
  41. Özer, M., Canbay, Ş., & Kırca, M. (2020). The impact of container transport on economic growth in Turkey: An ARDL bounds testing approach. Research in Transportation Economics, 101002.
  42. Pagan, A. R. and Hall, A.D. (1983). Diagnostic tests as residual analysis. Econometric Reviews, 2(2), 159-218. doi: 10.1080/07311768308800039.
  43. Park, J. S., Seo, Y. J., & Ha, M. H. (2019). The role of maritime, land, and air transportation in economic growth: Panel evidence from OECD and non-OECD countries. Research in Transportation Economics, 78, 100765.
  44. Randers, J., & Göluke, U. (2007). Forecasting turning points in shipping freight rates: lessons from 30 years of practical effort. System Dynamics Review, 23(2‐3), 253-284.
  45. Şeker, A. (2020). The Impacts of Liner Shipping Connectivity and Economic Growth on International Trade Case of European Countries and Turkey. In Handbook of Research on the Applications of International Transportation and Logistics for World Trade (pp. 139-150). IGI Global.
  46. Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. Liberty press, Indianapolis.
  47. Stopford, M. (2009). Maritime Economics 3rd Edition. Routledge: London.
  48. Strandenes, S. P. (2012). Maritime freight markets. The Blackwell Companion to Maritime Economics, 11, 107.
  49. Theotokas, I. (2018). Management of Shipping Companies. Routledge: New York.
  50. UNCTAD. (2018). Review of Maritime Transport 2018. New York & Geneva: United Nations.
  51. UNCTAD. (2020). Review of Maritime Transport 2020. New York & Geneva: United Nations
  52. Wang, H., Han, J., Su, M., Wan, S., & Zhang, Z. (2021). The relationship between freight transport and economic development: A case study of China. Research in Transportation Economics, 85, 100885.
  53. World Shipping Council (2017). https://www.worldshipping.org. Accessed 20.01.2021.