Maritime economics is the study of how shipping market is organized and how it works. The global economy relies heavily on maritime transport. Suffice it to say that, in Europe only, 90% of the trade with third countries and 30% of intra-European trade takes place by sea. This requires efficient shipping and port sectors, as well as attractive intermodal transport solutions promoting trade and contributing to sustainable mobility of goods and passengers.
This paper reports our efforts to design and estimate an econometric model of the world shipping market in which freight rates, shipbuilding, scrapping and lay-up are the central endogenous variables. The model distinguishes between two key sectors, the dry cargo sector and the tanker sector. However, these sectors are interlinked, inter alia, by combined carriers that are dual purpose vessels that may be used for dry cargos or crude oil. The model explicitly integrates stocks and flows and takes account of the fact that vessels take time to build, and once they are built constitute capital assets of considerably longevity. It also lays emphasis in rational expectations theory in the design and estimation of the model. The model is estimated from annual data that range from 1963 through the mid 1990s.
Chapter 1 examines the history of freight rates, prices, shipbuilding and scrapping over the last hundred years or so. It relates the fluctuations in these variables to the influence of the external factors. It draws on an extensive database in order to discuss the characteristic features of a typical shipping cycle. Chapter 2 reviews previous attempts at modelling the behaviour of shipping markets. It is argued that past events have been deficient in two important respects. First, new and second-hand ships have not been treated as capital assets. Secondly, expectations have not been treated properly. Chapter 3 develops a theoretical model that aims to remedy these deficiencies in past work. Thus both new and second-hand ships are treated as capital assets. Secondly, expectations are assumed to be rational. This allows, but not done in this paper due to time consuming efforts, to simulate the markets response to anticipated or unanticipated shocks. In chapter 4 and 5 the theory is used to specify and subsequently estimate an econometric model of the dry cargo and tanker market respectively. These models can also be used in order to carry out simulations of the effects of various shocks. However, simulations are not our goal in this thesis. In chapter 6 the individual dry cargo and tanker models are linked into an integrated model of the shipping markets. This integration allows to, but not done here, to simulate the spillover effects from one sector to the other. These spillover effects reflect the freight, shipbuilding and scrap market links that exist between the two sectors. In chapter 7 we give a presentation and interpretation of the estimation results of the entire dry cargo model discussed in chapter four. According to time budget, we do not estimate the econometric models presented in chapter five and six. However, it should be mentioned that the estimation procedures of the latter models are not significantly different from those presented of the dry cargo market with respects to estimation techniques and inference. This section is not meant as a complete simulation of the entire model, but rather an example on methodical approach. Given our methodical examinations, it should be straightforward to finalize and refines the estimation results of the entire model.