The Interaction of Business and Shipping Cycles in Practice

Elias Karakitsos and Lambros Varnavides
Additional contact information
Elias Karakitsos: University of Cambridge
Lambros Varnavides: Royal Bank of Scotland

Chapter 9 in Maritime Economics, 2014, pp 293-327 from Palgrave Macmillan

Abstract: Abstract Chapter 6 shows that shipping cycles are caused by business cycles. Actual and expected macroeconomic developments shape expectations of shipping market conditions, which affect in turn the outcome of the bargaining between owners and charterers over current freight rates. Given a shipyard delivery lag of two years, the supply of shipping services is largely predetermined by past expectations of current demand for shipping services. As a result, large swings in expectations of demand cause a disproportionate increase in the supply of fleet in the boom years. When the euphoria dissipates, the installed fleet leads to lower fleet capacity utilisation, thereby creating a shipping cycle. Volatile expectations can be rational, as a result of cyclical developments in macroeconomic variables, or irrational, what Keynes called ‘animal spirits’, a situation where economic fundamentals remain unchanged and yet expectations swing from optimism to pessimism or vice versa.

Keywords: Interest Rate; Gross Domestic Product; Monetary Policy; Business Cycle; Central Bank (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-38341-9_9

Ordering information: This item can be ordered from
http://www.palgrave.com/9781137383419

DOI: 10.1057/9781137383419_9

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().