Greek Shipping Receipts Revisited : A Freight Market and Country Risk Perspective

The receipts from shipping services have been a vital resource for the Greek economy covering a perennial trade deficit. The downward adjustment in freight rates following the Lehman brothers collapse was swift severely impacting shipping inflows into the Greek economy. Almost two years later, Greece, facing a debt crisis, had to conclude an economic adjustment programme with official lenders. In the process, country risk rose to record levels peaking around the 2012 Greek dual elections with the banking sector surviving minimum confidence only through the increase of central bank financing, including emergency liquidity assistance, of about 140 billion euros. Against this backdrop, concerns were voiced about the sustainability of Greek shipping inflows. The paper re-investigates both the long and short term determinants of shipping inflows in the Greek balance of payments throughout this turbulent period marked by high freight market volatility by using a symmetric error correction framework (ECM). The authors assess also the presence of any asymmetric adjustment through the estimation of an asymmetric error correction model (AECM). The paper assesses next the impact of the country specific risk on monthly shipping inflows around the peak of the country risk crisis. The paper is structured in five sections. Following introduction, the authors proceed to a literature review on Greek shipping receipts. The third section discusses freight market developments with a reference to the increased country risk since the end of the last decade. The model and the empirical results are presented in section four. In the final fifth section conclusions are discussed