Title: Exchange rate dynamics and oil transportation costs: connectedness and shock transmission

Authors: Şenol Babuşcu; Bade Ekim Kocaman; Savaş Tarkun; Adalet Hazar

Addresses: Department of International Finance and Banking, Faculty of Commercial Sciences, Baskent University, Türkiye ' Department of International Finance and Banking, Faculty of Commercial Sciences, Baskent University, Türkiye ' Department of Data Science and Analytics, Faculty of Engineering and Natural Sciences, Bursa Technical University, Türkiye ' Department of International Finance and Banking, Faculty of Commercial Sciences, Baskent University, Türkiye

Abstract: This study explores the relationship between exchange rates and oil transportation costs, emphasising the interconnectedness between financial markets and the maritime industry. Using a connectedness approach based on the time-varying parameter vector autoregression (TVP-VAR) model, the study first examines how exchange rate fluctuations affect oil freight indices such as Baltic Dirty Tanker Index (BDTI) and the Baltic Clean Tanker Index (BCTI). It then investigates how tanker markets, in turn, transmit shocks to financial markets. The findings indicate that oil shipping costs are significantly influenced by currency volatility, while the tanker market also acts as a shock transmitter, particularly during economic crises such as the COVID-19 pandemic and geopolitical conflicts. These results provide critical insights for policymakers and investors in managing exchange rate risks and stabilising global trade and energy markets.

Keywords: exchange rates; oil transportation; connectedness analysis; financial shocks; TVP-VAR model.

DOI: 10.1504/IJSTL.2026.153250

International Journal of Shipping and Transport Logistics, 2026 Vol.22 No.3, pp.327 - 352

Received: 04 Sep 2025
Accepted: 04 Dec 2025
Published online: 29 Apr 2026 *

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