Container Trade and the U.S. Recovery

Abstract

Since the 1970s, exports and imports of manufactured goods have been the engine of international trade and much of that trade relies on container shipping. This paper introduces a new monthly index of the volume of container trade to and from North America. Incorporating this index into a structural macroeconomic VAR model facilitates the identification of shocks to domestic U.S. demand as well as foreign demand for U.S. manufactured goods. We show that, unlike in the Great Recession, the primary determinant of the U.S. economic contraction in early 2020 was a sharp drop in domestic demand. Although detrended data for personal consumption expenditures and manufacturing output suggest that the U.S. economy has recovered to near 90% of prepandemic levels as of March 2021, our structural VAR model shows that the component of manufacturing output driven by domestic demand had only recovered to 57% of prepandemic levels and that of real personal consumption only to 78%. The difference is mainly accounted for by unexpected reductions in frictions in the container shipping market.

Investors' reactions to COVID-19 related announcements: evidence from the cargo shipping industry

“…It is commonly known that the demand for shipping vessels react to changes in the demand and supply of the commodities pending transportation (Kilian et al , 2020). Imposition of restrictions such as lockdowns during COVID-19 has disrupted the global supply chains putting a strain on the global shipping industry (Kilian et al , 2021). This predicament precipitates a need to evaluate cargo shipping investors' reactions following major announcements relating to the pandemic.…”