Asymmetric causality from commodity prices to shipping markets: an empirical research on ISTFIX region

Abstract

Dry bulk shipping is influenced mainly by demand for commodities due to its derived demand structure. As one of the main determinants of the commodity demand is the price, interactions between commodity prices and freight rates are inevitable. However, the relevant literature is limited and information asymmetry is not taken into account. The aim of this study is to examine the asymmetric causality from the prices of the commodities mostly transported in Istanbul Freight Index (ISTFIX) region to the freight rates by method developed by Hatemi-J (2012a). The dataset consists of 122 monthly observations covering the dates between January 2008 and February 2018. The results reveal that positive and negative shocks in coal and steel prices are symmetrically causes of the positive and negative shocks in ISTFIX while negative shocks in wheat prices are cause of positive shocks in the index, and positive shocks in the commodity are the causes of negative shocks in the index.