DETERMINING THE CAUSAL RELATIONSHIP BETWEEN BALTIC DRY INDEX (BDI) AND MACROECONOMIC VARIABLES BY TODA-YAMAMOTO ANALYSIS

Abstract

The Baltic Dry Index (BDI) is the most critical indicator taking the pulse of maritime trade. Hence, it is essential to determine the macroeconomic variables that affect the BDI, which is a solid indicator for global economic activities in maritime transport. This research paper studies the association between macroeconomic indicators and the BDI. For this purpose, the Toda-Yamamoto approach was performed to examine the causal association between macroeconomic variables and the BDI. The Lee-Strazicich (LS) unit root test was applied based on Model C (break) to determine the stationary of the model series. The research's findings shed significant light on the relationship between the BDI and macroeconomic variables. According to the Toda-Yamamoto causality test results: BDI has a two-way relationship with S&P 500 and MSCI World indexes; besides, there is a one-way relationship from €/$ parity to BDI and from BDI to BCOM index.

Keywords

• Baltic Dry Index
• Lee-Strazicich Unit Root test
• Toda-Yamamoto approach
• Causality analysis

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