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      The asymmetric relationship between Baltic Dry Index and commodity spot prices: evidence from nonparametric causality-in-quantiles test

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      Mineral Economics
      Springer Berlin Heidelberg
      Commodity, BDI, Quantiles, Price, Freight, Causality

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          Abstract

          The Baltic Dry Index (BDI) is a unique gauge for measuring the marine transportation of major dry bulk shipments. Increased sea freight is a precursor to the increase in economic activities. The volumes of sea trade and freight rates are influenced by import–export dynamics and changes in commodity prices. So, levels of commodity prices are monitored to gain insight into the anticipated demand for bulk shipments. In this study, the causality-in-quantiles (CiQ) model is used to model the causal relationship between BDI spot values and spot price of major dry bulk commodities like iron ore, aluminum, copper, agricultural products by considering 12 years of daily data. CiQ model is superior compared to other linear causality models as it helps in capturing the asymmetry and nonlinearity in causality based on different quantiles or market conditions i.e., bearish, normal, and bullish market conditions. Also, it captures the causality-in-mean as well as variance and helps in exploring the causal relationship in returns as well as volatility transmission between BDI and commodity prices. The finding of the paper throws interesting light on the asymmetric relationship between BDI and commodity prices- commodity prices are causing BDI in all market conditions, but the influence is stronger in normal periods than bearish and bullish periods. The causality from commodity to BDI follows a common pattern across most of the commodities. However, the effect of BDI on commodities considerably varies across the range of commodities and across market conditions. So, this model provides a plethora of information that will help commodity market participants to hedge the risk of variations in commodity price and freight rates effectively.

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              Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market

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                Author and article information

                Contributors
                arunava.b@iitkgp.ac.in
                Journal
                Miner Econ
                Mineral Economics
                Springer Berlin Heidelberg (Berlin/Heidelberg )
                2191-2203
                2191-2211
                4 November 2021
                : 1-21
                Affiliations
                GRID grid.429017.9, ISNI 0000 0001 0153 2859, Vinod Gupta School of Management, , Indian Institute of Technology (IIT), ; Kharagpur, West Bengal India 721302
                Author information
                http://orcid.org/0000-0002-6367-290X
                Article
                287
                10.1007/s13563-021-00287-y
                8566970
                ab65491a-3efd-4bbb-ae1d-47406d58df83
                © The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature 2021

                This article is made available via the PMC Open Access Subset for unrestricted research re-use and secondary analysis in any form or by any means with acknowledgement of the original source. These permissions are granted for the duration of the World Health Organization (WHO) declaration of COVID-19 as a global pandemic.

                History
                : 5 July 2021
                : 5 October 2021
                Categories
                Original Paper

                commodity,bdi,quantiles,price,freight,causality
                commodity, bdi, quantiles, price, freight, causality

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