Does the Baltic Dry Index drive volatility spillovers in the commodities, currency, or stock markets?

• We determine the impact of lagged Baltic Dry Index (BDI) on financial markets. • We develop a novice tri-variate VAR-BEKK-GARCH-X model to measure Baltic Dry Index over ten years. • We develop an adjusted DJGS index to include dry bulk shipping companies. • BDI affects the equity, currency, and commodities markets when crises occur in the U.S. and China. • BDI is a short-term (three to five years) rather than long-term (ten years) indicator. This study examines the spillover effect of the Baltic Dry Index (BDI) on the commodities futures, currency, and stock markets by using a tri-variate VAR-BEKK-GARCH-X model on a dataset from October 1, 2007 to October 31, 2018. Results reveal that the BDI spillover effect is time-varying. The spillover effect of the BDI was insignificant during the whole sample period but significant during the 2008/2009 global financial tsunami, and its influence increased during the 2014–2016 economic slowdown in China. The BDI serves as a short-term rather than long-term indicator for the commodities, currency, and equity markets, especially during financial crises.