Causality Analysis of Dry Bulk Cargo Freight and BRIC Economic Growth

By Chien-wen Shen and Chih-Hsin Lo.

Published by The Global Studies Journal

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Article: Print $US10.00
Article: Electronic $US5.00

The international trade of dry bulk cargo mainly relies on the bulk carrier to ship large quantities of unpackaged dry commodities like iron ore, coal, grains, bauxite and rock phosphate. As the freight charge of dry bulk cargo accounts for large portion of supply chain cost, it’s important for supply chain partners to understand the factors affecting the bulk freight market. Although previous literature has shown the existence of relationships between bulk freight and economic growth, the role of emerging countries regarding these relationships has been addressed little. Accordingly, the purpose of this study is to investigate the causality relationships between the Baltic Dry Index (BDI) and the gross domestic product (GDP) of the BRIC (Brazil, Russia, India and China) countries from the perspectives of equilibrium analysis and Granger’s causality test. The cumulative sum procedure was applied first to examine the structural change point of each time series data. Then we used equilibrium analysis to explore the long-term and short-term relationships between the BDI and BRIC’s GDP. Finally, Granger’s causality test was adopted to understand whether one time series can provide statistically significant information about future values of another time series. Our findings indicate that long-term and short-term equilibrium relationships exist between the BDI and China’s GDP. Moreover, there is bidirectional causality with feedback runs between the BDI and China’s GDP. However, no significant causalities were found between the BDI and the GDP of Brazil, Russia, and India. Analysis results imply that China’s economic growth plays important position on the market of dry bulk freight.

Keywords: Dry Bulk Cargo, Baltic Dry Index, Gross Domestic Product, BRIC, Equilibrium, Granger’s Causality

Global Studies Journal, Volume 3, Issue 4, pp.141-148. Article: Print (Spiral Bound). Article: Electronic (PDF File; 1.092MB).

Dr. Chien-wen Shen

Assistant Professor, Department of Business Administration, National Central University, Jhongli City, Taiwan

Chien-wen Shen is an Assistant Professor in the Department of Business Administration at National Central University, Taiwan. He received his MS and PhD in industrial engineering and management sciences from Northwestern University. His major research areas include decision science, supply chain management, global logistics, and information management. Major research outputs include the marginalization approach of learning Bayesian networks, forecasting models for the manual manufacturing process of thin-film transistor liquid-crystal display, Bayesian estimations for the production smoothing models, and econometric modeling for transportation activities.

Chih-Hsin Lo

Department of Logistics Management, National Kaohsiung First University of Science and Technology, Kaohsiung City, Taiwan

National Kaohsiung First University of Science and Technology, Taiwan.

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