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The effects of geopolitical risk and economic policy uncertainty on dry bulk shipping freight rates

Author

Listed:
  • Wolfgang Drobetz
  • Konstantinos Gavriilidis
  • Styliani-Iris Krokida
  • Dimitris Tsouknidis

Abstract

We examine the effects of geopolitical risk (GPR) and economic policy uncertainty (EPU) on shipping freight rates using a Bayesian VAR model. A positive shock to global GPR has an immediate positive, but gradually diminishing, effect on dry bulk shipping freight rates. This effect is driven by global rather than country-specific GPR shocks. Positive shocks to EPU indices for the U.S., Brazil, and China trigger a negative response of dry bulk shipping freight rates that builds gradually over several months. Historical cumulative effects of both GPR and EPU shocks on freight rates can be large and of different signs during different subperiods. Our results are important for both shipowners and charterers when fixing chartering strategies and prioritizing investments in newbuilding or second-hand vessels.

Suggested Citation

  • Wolfgang Drobetz & Konstantinos Gavriilidis & Styliani-Iris Krokida & Dimitris Tsouknidis, 2021. "The effects of geopolitical risk and economic policy uncertainty on dry bulk shipping freight rates," Applied Economics, Taylor & Francis Journals, vol. 53(19), pages 2218-2229, April.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:19:p:2218-2229
    DOI: 10.1080/00036846.2020.1857329
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    Cited by:

    1. Wenyang Wang & Nan He & Peng Shao & Jibin Zhou, 2025. "An interpretable multi-model ensemble deep learning framework for forecasting ocean freight indices with external uncertainty factors," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 27(4), pages 628-661, December.
    2. Akyildirim, Erdinc & Corbet, Shaen & Ryan, Michael & Mukherjee, Abhishek, 2025. "The influence of maritime freight cost tail risk on publicly traded industrial and transport companies," Journal of International Money and Finance, Elsevier, vol. 157(C).
    3. Zhao, Chuan & Guo, Qidong & Dong, Kangyin & Mo, Lipo, 2024. "Multi-scenario analyses for antitrust immunity policies on shipping alliances: A dynamic tripartite evolutionary game perspective," Transportation Research Part A: Policy and Practice, Elsevier, vol. 179(C).
    4. Panos K. Pouliasis & Christos Bentsos, 2024. "Oil price uncertainty and the relation to tanker shipping," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 2472-2494, April.
    5. Pham, Linh & Hsu, Kuang-Chung, 2025. "Metals of the future in a world in crisis: Geopolitical disruptions and the cleantech metal industry," Energy Economics, Elsevier, vol. 141(C).
    6. Chen, Yanhui & Chen, Chujun & Fatema, Kaniz & Mi, Jackson Jinhong, 2025. "The spillover effects of trade policy uncertainty on the shipping industry," Research in Transportation Economics, Elsevier, vol. 114(C).
    7. Chen, Yanhui & Zhou, Xiaoyu & Chen, Shun & Mi, Jackson Jinhong, 2024. "LNG freight rate and LNG price, carbon price, geopolitical risk: A dynamic connectedness analysis," Energy, Elsevier, vol. 302(C).
    8. Brignone, Davide & Gambetti, Luca & Ricci, Martino, 2024. "Geopolitical risk shocks: when size matters," Working Paper Series 2972, European Central Bank.
    9. Chen, Shuiyang & Hao, Siting & Meng, Bin & Zhang, Yajing & Kuang, Haibo, 2025. "Revisiting oil and tanker shipping markets: The role of geopolitical risk in shaping spillover dynamics," Energy, Elsevier, vol. 321(C).
    10. Kostika, Eleftheria & Siameti, Panagiota & Dotsis, George, 2025. "Monetary policy effects on freight rates of dry bulk vessels," International Economics, Elsevier, vol. 182(C).
    11. Konstantinos D. Melas & Nektarios A. Michail, 2024. "Can commodity prices predict stock market returns? The case of dry bulk shipping companies," Journal of Shipping and Trade, Springer, vol. 9(1), pages 1-14, December.
    12. Si, Ruibin & Wang, Nan & Jia, Peng & Li, Haijiang & Yuan, Shuang, 2026. "Unraveling structural shifts and resilience patterns of global and intercontinental crude oil maritime transportation networks under geopolitical conflicts: A multiplex network model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 206(C).
    13. Wen, Haosong & Zhao, De & Yu, Weijie & Chen, Jun & Wang, Wei, 2024. "A multi-stage game framework for new route promotion: Behavioral strategy and dynamic evolution of shippers, carriers, and governments," Transport Policy, Elsevier, vol. 159(C), pages 375-391.
    14. Chen, Shuiyang & Meng, Bin & Qiu, Bingcheng & Kuang, Haibo, 2025. "Dynamic effects of maritime risk on macroeconomic and global maritime economic activity," Transport Policy, Elsevier, vol. 167(C), pages 246-263.
    15. Gu, Bingmei & Liu, Jiaguo, 2022. "Determinants of dry bulk shipping freight rates: Considering Chinese manufacturing industry and economic policy uncertainty," Transport Policy, Elsevier, vol. 129(C), pages 66-77.
    16. Migliavacca, Milena & Anwer, Zaheer & Fandella, Paola, 2026. "Geopolitical risk and stock market volatility: The case of US weapon and non-weapon firms," Research in International Business and Finance, Elsevier, vol. 81(C).
    17. Bin, Meng & Shuiyang, Chen & Jingjing, Dong, 2025. "Nonlinear risk dynamics and strategic Management: Insights for LNG shipping policy and practice," Transport Policy, Elsevier, vol. 173(C).
    18. Correa da Cunha, Henrique & Singh, Vikkram & Amal, Mohamed & Farrell, Carlyle & Mangal, Shivanie & Grellmann, Glaucia, 2026. "The impact of US and China geopolitical risk on foreign direct investment in Latin America," International Business Review, Elsevier, vol. 35(1).
    19. Tran Thi Mai Thanh & To Ngoc Lan, 2025. "Spillover Effects of Foreign Policy Uncertainty and their Impact on FDI Inflows in Asia–Pacific: A Panel Quantile Approach," Economics, Sciendo, vol. 13(4), pages 293-312.
    20. Gong, Yuting & Peng, Yongyuan & Xu, Luxuan & Chen, Kecai & Shi, Wenming, 2025. "Shipping news sentiment as a predictor of iron ore freight rates: Hybrid evidence from lexicon-based analysis and threshold autoregression modelling," Transport Policy, Elsevier, vol. 169(C), pages 178-190.
    21. Melas Konstantinos D. & Michail Nektarios A. & Louca Kyriaki G., 2025. "Trade Uncertainty, Economic Policy Uncertainty and Shipping Costs," German Economic Review, De Gruyter, vol. 26(1), pages 15-33.
    22. Sun, Ruikai & Abouarghoub, Wessam & Demir, Emrah & Potter, Andrew, 2026. "Geopolitical disruptions and maritime transitions: Environmental and economic costs of rerouting," Transportation Research Part A: Policy and Practice, Elsevier, vol. 203(C).

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