The impact of Macroeconomic conditions on Country-level freight rates: A comparative analysis of leading automotive component export countries

Abstract:

The research examines the impact of macroeconomic conditions on country-level freight rates in leading automotive component export countries. Secondary data of 240 monthly observations were collected for global macroeconomic variables and ocean freight rate proxies in the US, Japan, South Korea, and Germany. Using Vector autoregression, combined with Granger-causality, impulse response functions and forecast error variance decomposition, the study found varying significant effects from macroeconomic conditions. The study used counterfactual analysis to identify an indirect transmission channel whereby global freight rates dampens macroeconomic effects in South Korea and Japan, while strengthening those in Germany. From these results, recommendations are made for automotive component exporters to adapt to each country’s unique sensitivity to manage increasingly volatile maritime freight costs.