The Role of Shipping in Forecasting Economic Development
95 Pages Posted: 17 Aug 2010
Date Written: December 15, 2008
Abstract
This study proposes a link between economic development and the shipping markets which can be exploited for forecasting. Market participants anticipate the future and take actions accordingly. The resulting effects are absorbed in structural autoregressive distributed lag models and in factor models. Characteristic linkages between past and present data are found using a general-to-specific procedure to select models of lagged variables. The links suggest a long-term relationship between shipping market segments and the economy proxied by industrial production. The performance of forecasting models derived from these lags does not improve on a simple autoregressive benchmark. Nor do factor models perform well in this setup. The use of neither technique is recommendable for forecasting using shipping market variables. The established underlying relations are prime candidates for more structural forecasting models. Analysis suggests that a well-determined lag structure can improve forecasts of models with lagged shipping market variables.
Keywords: shipping markets, forecasting, time-series models, model selection, lag order determination, factor models
JEL Classification: C32, C51, C53, F17
Suggested Citation: Suggested Citation
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