The relationship between shipping freight rates and inflation in the Euro Area

Nektarios Michail, Konstantinos D. Melas and Lena Cleanthous

International Economics, 2022, issue 172, 40-49

Abstract: Consumer inflation across the globe has rebounded during 2021 due to supply-side disruptions, one of which is the increase in freight costs. To elaborate on the relationship between inflation and shipping costs, we employ a Vector Error Correction Model (VECM) and use disaggregated monthly data from January 2009 to August 2021, using both constant tax and the standard price indices. Following a shock in freight rates, the most hard-hit sectors appear to be garments and major household appliances, items that have traditionally been manufactured outside the euro area. In addition, using a threshold regression methodology, we show that when freight rates rise more than $1300-$1500 per day, the sensitivity of inflation to freight changes increases.

Keywords: Inflation; Freight rates; Supply shock; Shipping (search for similar items in EconPapers)
JEL-codes: E31 R4 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Journal Article: The relationship between shipping freight rates and inflation in the Euro Area (2022)
Working Paper: The relationship between shipping freight rates and inflation in the Euro Area (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepiie:2022-q3-172-3

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