The Baltic Dry Index (BDI) tracks the cost of shipping commodities, such as coal, iron ore, steel, cement, and grain, around the world. Information is available since 1744 when merchants and ships’ captains at the Virginia and Baltic Coffee House in London’s Threadneedle Street were exchanging views on the course of their business. In 1985, the Baltic Exchange launched the BDI as a primary indicator of shipment rates (Apergis and Payne 2013).

I am wondering if there is any study using Baltic Dry Index (BDI) as a shock. I am finding a paper using BDI as a shock (maybe the BDI at some level, it can be called a shock).

  • $\begingroup$ Shock for what purpose? $\endgroup$
    – Alex
    Commented May 16, 2022 at 4:24
  • $\begingroup$ @Alex shock to examine it as an event. For example, to apply the Difference-in-Differences setting on it $\endgroup$ Commented May 16, 2022 at 4:32

1 Answer 1


There seem to be many such papers. Here are four.

Shipping Costs and Inflation

The Covid-19 pandemic has disrupted global supply chains, leading to shipment delays and soaring shipping costs. We study the impact of shocks to global shipping costs—measured by the Baltic Dry Index (BDI)—on domestic prices for a large panel of countries during the period 1992-2021. We find that spikes in the BDI are followed by sizable and statistically significant increases in import prices, PPI, headline, and core inflation, as well as inflation expectations. The impact is similar in magnitude but more persistent than for shocks to global oil and food prices. The effects are more muted in countries where imports make up a smaller share of domestic consumption, and those with inflation targeting regimes and better anchored inflation expectations. The results are robust to several checks, including an instrumental variables approach in which we instrument changes in shipping costs with an indicator of closures of the Suez Canal.

Baltic Dry Index and the democratic window of opportunity

In their seminal paper, Brückner and Ciccone (2011) document that a significant effect of democratic change may be triggered by negative transitory economic shocks, and that rainfall can open a democratic window of opportunity in sub-Saharan Africa (SSA). As a complement, this paper uses within-country variation in the Baltic Dry Index (BDI) as a source of transitory negative income shocks to SSA countries. The BDI reflects the cost of utilizing dry bulk carriers, which are specially designed vessels for transporting primary goods internationally, where these goods dominate the output and export sectors of the SSA economies. We find that positive BDI cost shocks are followed by significant contraction in income through trade channel and significant improvement in democratic institutions, where BDI can open a window of opportunity for democratic improvement. Instrumental variables estimates indicate that following a negative income shock of one percentage point, democracy scores improve by around 4–5 percentage points on average.

Learning by exporting effect in China revisited: An instrumental Approach

Does exporting increase the firm’s productivity causally? Focusing on Chinese exporters over the period 1998-2007, we construct a new measure of firm-specific trade cost, based on the daily Baltic Dry Index (BDI), as an instrument of exports. The BDI is termed a leading trade cost indicator, reflecting the cost of utilizing dry bulk carriers which primarily consists of materials that function as raw material inputs to the production of finished goods. We find that a one percentage point expansion in exports raises firm total factor productivity by approximately 0.04 percentage point on average, which accounts for nearly 60 percent growth of the exporter’s productivity over the period 1999-2007.

Trade, Institution Quality and Income Inequality

To address this, we adopt an instrumental variable approach by using two well-accepted trade cost variables in the literature as instruments for trade: one is based on Baltic Dry Index (BDI) in primary goods (Lin & Sim, 2013) and another is based on more than 20 primary commodity price index following Arezki and Brückner (2012).

  • $\begingroup$ Thanks @BKay, but it seems that these paper just employed BDI as independent variables, not a score for a shock recognition $\endgroup$ Commented May 17, 2022 at 3:40
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    $\begingroup$ I'm not sure what you mean by a score for shock recognition. That said, you asked if there are "...any study using Baltic Dry Index (BDI) as a shock. ", and I offered you four such papers. $\endgroup$
    – BKay
    Commented May 17, 2022 at 12:18

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