Time-Lagged Effects between Freight Rates and Construction Cost in South Korea

In recent years, global construction costs have risen due to supply chain disruptions and a prolonged high interest rate environment. Countries such as South Korea, which rely heavily on imported construction materials, are particularly sensitive to international freight and financing conditions. Despite this, the dynamic effects of freight rates on construction costs remain insufficiently explored. This study empirically examines the time-lagged relationships among construction costs, global freight rates, and interest rates using a Vector Autoregression (VAR) framework. Monthly data from 2014 to 2023 are employed, including the Korean Construction Cost Index (KCCI), interest rates (COFIX), the China Containerized Freight Index (CCFI), and the Baltic Dry Index (BDI). The analysis incorporates VAR estimation, Granger causality tests, cross-correlation analysis, impulse response functions, and variance decomposition to evaluate interdependencies among variables. The results indicate that both global freight rates and domestic interest rates exert significant dynamic effects on construction cost fluctuations, with varying time lags. The VAR model demonstrates moderate explanatory power (R² = 0.5286). These findings provide empirical evidence of the transmission mechanisms through which global logistics costs and financial conditions influence construction costs, offering practical implications for cost management and risk mitigation strategies in the South Korean construction industry.