Greek Shipping Receipts Revisited: A Freight Market and Country Risk Perspective

The receipts from shipping services have been a vital resource for the Greek economy covering a perennial trade deficit. The downward adjustment in freight rates, following the Lehman Brothers collapse was swift, impacting severely on Greek shipping inflows. Almost two years later, Greece, facing a debt crisis, had to agree to an economic adjustment programme with its institutional lenders. As the sovereign crisis was peaking, there were increasing concerns - based on anecdotal evidence - on the ability of the shipping sector to maintain a stable level of inflows similar to the one seen in the past due to: (a) the freight market volatility and (b) the Greek-sovereign risk. This chapter attempts to answer these two questions and to reveal also the role of the sovereign risk in the course of shipping inflows in the recent turbulent years.The empirical analysis by employing FMOLS and DOLS cointegration methods for the estimation of the long-run relationship suggests that the shipping inflows are determined mainly by developments in the freight market and the number of outstanding loans to the shipping sector by Greek-based financial institutions. It is also revealed that in the long-term the sovereign risk does not have a significant impact on the shipping inflows. In contrast, the effect of the sovereign risk has a statistically significant negative effect on the shipping inflows only in the short-term, but the impact still remains minimal.