 Endogeneity of commodity price in freight cost modelsKian Guan Lim Journal of Commodity Markets, 2022, vol. 26, issue C Abstract: In this paper, we answer a novel question on how the value of goods carried can affect the freight cost. We focus on the issue based on a more specialized freight market involving transport of seaborne iron ore from mining ports to Qingdao in China during the period 2014 to 2019. We construct simultaneous systems of demand–supply equations on both the iron ore market and the freight market. In the models, we explain how endogeneity of iron ore as a regressor can arise due to the nexus between the two markets, and that the freight demand is largely a derived demand from iron ore demand by PRC firms importing the iron ore. Employing instrumental variable two-stage least squares regression, it is shown that iron ore price negatively affects, ceteris paribus, the freight rate of bulk carriers ferrying the iron ore. Industrial growth, bunker fuel oil, Baltic Dry Index, and transport distance have positive effects on the freight rates. Keywords: Freight rate; Iron ore price; Endogeneity; Panel regression (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:26:y:2022:i:c:s2405851321000507 DOI: 10.1016/j.jcomm.2021.100217 Access Statistics for this article Journal of Commodity Markets is currently edited by Marcel Prokopczuk, Betty Simkins and Sjur Westgaard More articles in Journal of Commodity Markets from Elsevier |
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