Dry bulk shipping and business cycles

Abstract

This thesis studies short- and long-term relationships between freight rates in dry bulk shipping and business cycles. The analysis combines a theoretical specification of the market with an econometric approach to study time series data. In the empirical part of the thesis several of the business cycle indicators, including the gdp for all of the countries tested, turned out to be cointegrated with the freight rates. This result means that there exists an equilibrium relationship between the business cycle and the freight rates in dry bulk shipping. Error correction models were then used to study the short-term dynamics between the cointegrated freight rates and the relevant business cycle measures. The thesis further illustrates the importance of interpreting the empirical results in terms of a competitive equilibrium model.