Demand Analysis for Coal on the United States Inland Waterway System: Fully Modified Cointegration (FM-OLS) Approach

Abstract

The Phillip-Hansen fully-modified cointegration (FM-OLS) approach is applied to examine the dynamic relationship between demand for coal barge transportation, and explanatory variables such as barge and rail rates, domestic coal consumption and production, and coal exports. The results provide strong evidence that there exists a long-run equilibrium relationship between demand for coal barge transportation and the selected variables. It is also found that, in the long-run, the domestic coal consumption and coal exports are more important than other variables in determining the demand for coal barge transportation. In the short run, on the other hand, domestic coal production is found to be the only significant determinant of coal demand. This dynamic analysis will shed new light on the dynamic interrelationships between the demand for coal barge transportation and its major determinants, and contribute to the empirical literature on transportation economics.