Monetary policy effects on freight rates of dry bulk vessels

This paper examines how monetary policy shocks affect freight rates by applying a VAR model using data for the period 2003–2022. The empirical analysis reveals a significant impact of monetary policy on freight rates of dry bulk vessels. After a contractionary monetary policy shock, freight rates as measured by the Baltic Dry Index (BDI) display a sharp decrease and subsequently start to increase until they reach a peak after almost two and a half years. Concerning individual cargo types, we show that vessels of largest capacity suffer a sharper decrease than the other vessel types in the short run, whereas the persistency of the increase towards the peak point is consistent across all cargo types.