Asymmetric Reflection of Shocks in Baltic Dry Index to Istanbul Freight Index

Since the maritime freight markets have inelastic supply structures in the short run, freight is considered an indicator of trade volume. Freight rates can rise rapidly when fleet utilization is high, as supply, which does not increase in the short run due to time of ship building, cannot respond to increases in demand. In this sense, the relationships between the relevant freight indices can be examined in order to determine the regional reflections of global commercial developments. The aim of this study is to examine the effects of the shocks in Baltic Dry Index (BDI), which is an indicator of dry bulk trade in the global sense and considered as a leading indicator of the world economy by many researchers, on Istanbul Freight Index (ISTFIX), which is an indicator of trade in the Mediterranean and Aegean in the regional sense. The dataset covers the period between 31.12.2007 and 19.02.2018, and consists of 524 weekly observations. Asymmetric causality test is used in order to reveal relationship between variables. According to the findings, a significant causality relationship was determined only from negative shocks in BDI to negative shocks in ISTFIX. This situation shows that the contraction in global trade is immediately reflected in the ISTFIX region, while the expansion in trade is not immediately reflected.