Abstract
This study investigates the causality between the spread of the COVID-19 pandemic (measured by new cases per million and new deaths per million) and geopolitical risks (measured by the index of geopolitical risks). We use the balanced panel data framework in 18 emerging economies from January 2020 to August 2020. We run the initial tests of cross-sectional dependence and the panel unit root tests with capturing cross-sectional dependence. Then, we utilize the panel Granger non-causality tests for heterogeneous stationary panel datasets. According to the findings, there is a significant causality from both measures of spreading the COVID-19 pandemic to geopolitical risks. Further tests are performed, and potential implications are also discussed.
Highlights
The new type of Coronavirus, so-called the COVID-19, emerged in the very late days of 2019 and has affected every corner of the world by providing different aspects
This paper aims to examine the causal relationship between the spread of the COVID-19 pandemic and geopolitical risks
There is no statistically significant causality from GPR to ∆NCPM and ∆NCPM, according to the W-Stat and the Zbar-Stat test statistics. These findings indicate that the spread of the COVID-19 causes geopolitical risks in emerging economies
Summary
The new type of Coronavirus, so-called the COVID-19, emerged in the very late days of 2019 and has affected every corner of the world by providing different aspects. Governments have implemented different policy implications to address the negative consequences of the spread of the COVID-19 pandemic. The COVID-19 pandemic has negatively affected the financial markets [2]. The COVID-19 pandemic makes the economies more unstable via various channels, such as the volatility in commodity markets and financial markets. Emerging economies have experienced significant volatility in their export revenues. There is a significant difference between the situation faced by emerging economies and developed countries when facing the COVID19 pandemic. At this stage, the COVID-19 pandemic creates governance problems, especially in emerging economies, due to the lack of coordination capacity. We aim to examine whether these issues affect the geopolitical risks
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