Business cycles, commodity prices and shipping freight rates: Some evidence from the pre-WWI period

The empirical analysis shows that cycles in economic activity are major determinants of the short-run behaviour of shipping freight rates in the years between 1850 and WWI. Consistent with economic theory there is a striking asymmetry between the peaks and troughs of shipping cycles, however. There is often a close timing relationship between the upper turning points of the business cycle, commodity prices and freight rates, which is shown to be particularly tight in the grand peak years of 1873, 1889, 1900 and 1912. On the other hand, the dating of the lower turning points of the freight rate cycles is often more indeterminate, differing considerably between the various trade routes and being generally less well synchronized with the business cycle troughs.