Food security, prices, and geopolitical risk: A dynamic panel threshold model

Purpose. The most recent conflicts have demonstrated that geopolitical risk has evolved into a significant issue that has an impact on the global food markets. Through the use of bi-wavelet coherence analysis, the study aimed to establish the ways in which geopolitical risk and climate policy uncertainties influences the food commodity market using Geopolitical Risk Index (GPR index), Climate Policy Uncertainty Index (CPU index) and the five components that make up the FAO Food Price Index (FPI). Methodology / approach. The study used monthly data spanning from January 1990 to March 2024. Geopolitical risk was measured using the GPR index developed through textual analysis of news articles. CPU index, developed using similar textual analysis, is used to represent the uncertainties related to climate change risk. The FAO’s FPI constituents were used to represent global food commodity market. The research applied advanced econometric methods including Johansen cointegration tests, Toda-Yamamoto causality analysis, Brock-Dechert-Scheinkman (BDS) nonlinearity tests, and bi-wavelet coherence analysis. Wavelet coherence analysis was particularly focused due to its capability to capture dynamic, time-frequency relationships among non-stationary data series. Results. The study found two significant long-run cointegrating relationships among GPR, CPU and FPI constituents. Causality tests indicated that geopolitical risk significantly influenced climate policy uncertainty but not vice versa. Wavelet analysis revealed that GPR and vegetable oil has more strong co-movement, and it is also the same in the case of CPU. CPU has a leading influence on GPR, which means that policy uncertainties lead to increased geopolitical tensions. Uncertainties in climate policies have an effect on food commodity market in the short run. Whereas, GPR affects cereals during geopolitical tension periods. In the case of dairy products, time varying co-movements in the short run could be witnessed whereas in the long run medium co-movement could be seen. Volatilities occur in the prices of vegetable oils during periods of crisis which can exacerbate prices of other food commodities, which can lead to food security issues. Originality / scientific novelty. The originality of the study lies in the fact that the main focus is on GPR, CPU and five constituents of FAO’s FPI. Moreover, the study uniquely incorporates CPU index as a proxy to climate change risk and its impact on food commodity market. Most of the studies focus on the spillover effect of geopolitical risk on different classes of asset. Significant number of literatures focus on the spillover effect on oil market, stock market and commodities market. However, there are only limited studies that focus on food commodity market. In addition, analysing these factors provides a deeper understanding of how they affect food security and market dynamics. This innovative approach offers valuable insights to policymakers, investors and stakeholders of food commodity market. Practical value / implications. Creating a more economically sustainable environment is the goal of every country, which requires joint efforts by various sectors of the financial market, government officials and economic regulators. These findings are of great importance to policymakers and stakeholders in global food systems, highlighting the need to create adapted policy frameworks, focus on the vulnerability of individual commodities, and carefully implement climate policies to mitigate potential negative impacts on food security.

Impact of different geopolitical factors on the energy transition: The role of geopolitical threats, geopolitical acts, and geopolitical risks

Fulfilling food and nutrition for all is a priority policy for national development. This policy aligns with Sustainable Development Goal 2, No Hunger. Achieving this target is not easy because Indonesia has a large population with positive growth. On the other hand, climate change and the degradation of land and water resources are continuing. The Covid-19 pandemic and geopolitical tensions currently exacerbate these challenges. This study aims to analyze the performance of Indonesia's food security and formulate policy recommendations. The primary sources of data and information come from the publication of the Global Food Security Index (GFSI) 2021 and the Food Security Vulnerability Atlas (FSVA) 2021. The data are analyzed descriptively and qualitatively. Based on GFSI, in 2021, from 113 countries studied, Indonesia's food security was ranked 69th. At the national level, based on the FSVA, Indonesia has achieved food security nationally. However, 74 out of 514 districts/cities were still vulnerable to food insecurity. Efforts to accelerate the achievement of food and nutrition security need to be focused on dimensions that are considered to have weak performance and in areas that are vulnerable to food insecurity, namely food 1) consumption and safety and 2) natural resources and resilience. In line with that, it is necessary to accelerate the development of basic service infrastructure (health, education, and roads), especially in Eastern Indonesia, and empower the community to increase their income. Food policies must be integrated and synergized with national economic and health policies.

ABSTRACTThe aim of this study is to investigate the impact of geopolitical risk and economic policy uncertainty on natural resource rents for selected MENA countries and Turkey, covering the period 1973–2021. The geopolitical risk index was researched by Caldara and Iacoviello and the World Uncertainty Index was taken from Ahir et al. We used linear and nonlinear ARDL techniques. Results from linear ARDL models document that geopolitical risk has a significant positive effect on natural resource rents in Egypt and Turkey, while it has a negative effect on natural resource rents in Saudi Arabia and Tunisia. When we look at the impact of uncertainty on natural resource rents, we see that increasing uncertainty reduces natural resource rents in all countries except Saudi Arabia. Moreover, the findings of nonlinear ARDL models show that negative and positive shocks in the geopolitical risk and uncertainty index affect natural resource rents in both the short and long term. Our results show that geopolitical risk and economic policy uncertainty can be used to improve models of natural resource markets.

The study explores inter-relations between the geopolitical risk index and renewable energy volatility index at frequency dimensions from April 4, 2019, to June 13, 2022, using novel multivariate wavelet analysis approaches, such as partial wavelet coherency and partial wavelet gain. Our method allows us to study these interlinkages at various time frequencies. We also consider the influences of uncertain events like the COVID-19 pandemic and Ukraine-Russia conflicts on their interconnectedness. The multiple coherencies between the geopolitical risk index and the green energy sector suggest four cycles in the low-frequency range (50-130days) from March 2020 to October 2021 and from February 2022 to June 2022. The partial coherency between the geopolitical risk index and renewable energy volatility index suggests connectedness between renewable energy dynamics and geopolitical risks during the COVID-19 duration and the Russia-Ukraine conflict. The partial wavelet coherency of the volatility of green bonds and geopolitical risks suggests that alterations in green bonds caused alterations in geopolitical risks, and the association is negative from February 2021 to April 2021. Both indicators are in-phase with geopolitical risks pushing from February 2020 to April 2020 and from October 2021 to the end of the sample. The partial coherence between clean energy and geopolitical risk suggests geopolitical risks pushing anti-phase connectedness from September 2020 to September 2022. Our findings help policymakers design the most effective policies to lessen the vulnerabilities of these indicators and reduce the spread of risk or uncertainty across them by having insightful knowledge about the primary antecedents of the contagions among these indicators.

A way to achieve sustainable economic growth in developing countries is to increase investments with domestic savings. However, not every country has an equal opportunity in terms of domestic savings. The desired level of investment expenditures cannot be reached in countries with a savings gap. In this case, foreign direct investment (FDI) becomes more valuable in meeting countries’ investment needs. Nevertheless, companies may not behave very bravely in their investment actions in other countries. There is a considerable risk and uncertainty avoidance in the nature of investment because uncertainty and risk are accepted as harbingers of instability for a country. Since the main goal of companies is to make a profit, they may start thinking that they will not have the opportunity to make a profit in an unstable economy. Hence, the risk perception in the investment environment must be low for developing countries to become attractive for FDI inflows. Geopolitical risks, as well as economic, political, and strategic risks that countries will be exposed to, are important indicators considered in FDI inflows. Literature research shows that investors are aggressive in investing with a profit appetite and, with exceptions, are sensitive to geopolitical risks. In other words, FDI decreases in countries where geopolitical risks tend to increase. The present study tested the validity of this assumption in the literature for Türkiye. The impact of geopolitical risks on FDI was analyzed with the ARDL Boundary Test Approach for the period 1985-2020. FDI inflows were used as the dependent variable, and the Geopolitical Risk (GPR) Index, a measure of geopolitical risk, was used as the independent variable. Moreover, growth, globalization, and inflation are the other independent variables analyzed. The test results demonstrated the negative effect of the increase in the GPR index on FDI inflows. In terms of the results obtained, the study provides an important perspective on the prioritization of the geopolitical risk factor in the evaluation of foreign investment performance.

The Global Food Security Index (GFSI) conducted yearly by the Economist Intelligence Unit (EIU), provides a common framework for understanding the root causes of food insecurity by looking at the dynamics of food systems around the world. In order to measure level of food security, various indicators have been defined. The Global Food Security Index (GFSI) is an indicator that measures the level of food security of individual countries and allows comparison between them. The aim of this seminar paper is to analyze the state of food security and its individual dimensions in Ghana and a comparative analysis with selected neighboring countries (Côte d’Ivoire, Burkina Faso, Togo and Nigeria) in the Global Food Security Index (GFSI) 2012 – 2021 with the key focus on the 2021 GFSI. The current GFSI data for 2021 revealed that Ghana was best ranked among the selected neighboring countries at the 82nd position, while Nigeria was the worst ranked at the 97th position (out of 113 countries). Also, Ghana took the 4th position within the Sub-Saharan African countries and 2nd position within the West African sub-region. In addition, a comparative analysis on the overall ranking of Ghana and neighboring countries according to GFSI for the past decade (2012 – 2021) gives an obvious indication that Ghana had been leading the neighboring countries in terms of food security since the inception of the GFSI. Meanwhile, it can be concluded that there is the need for food security improvement in Ghana despite its leading role within the West African sub-region. The following were observed as weaknesses in ensuring food security in Ghana: lack of water and lack of adequate policies to ensure food security and political commitment to adaptation, followed by significant food loss, and undiversified diet. It is recommended that the government of Ghana will adequately resource the various institutions responsible for food security issues such as the Ministry of Food and Agriculture (MOFA) and National Food Buffer Stock Company (NAFCO) in order to ensure a sustainable food secured country.

Geopolitical risk uncertainty and oil future volatility: Evidence from MIDAS models

IssueFood insecurity is in close relationship with the determinants of health. Global crisis including climate change (CC), natural disasters, poverty can deepen the burden, and all are linked with the economic, social, commercial, structural determinants of health. Defining such connections may help in proposing practical solutions.Description of the problemCOVID-19 pandemic made the food security (FS) problem more visible. Food security considers basically the affordability, availability, and the quality of food. Food insecurity (FiS), violation of the right to healthy food, influences disease patterns and causes communicable and non-communicable diseases (NCDs). Globally, 71% of deaths are attributed to NCDs. Analyzing the relationship between FiS and other determinants of health like CC may be helpful for sustainable solutions in such a world where we are talking on “our planet, our health” motto. Example given in this study is the relationship between the country values/rankings of the “Global Food Security Index (GFSI)” and the “Climate Change Performance Index (CCPI)”. GFSI defines the FS situation and CCPI defines countries’ response to CC.ResultsCountries’ CCPI and GFSI values do not show a linear relationship. For example, Norway, as a country at the top of the Human Development Index (HDI) ranking list has both high CCPI and GFSI values. On the other hand, although USA and Canada have low CCPI, both have good GFSI values. Sub dimensions of the indicators may also vary across countries. Crisis like COVID-19, conflicts, poverty emphasize the need on improving the indicators in a transdisciplinary approach.LessonsInvestigating indicators taking the determinants of health into account is helpful. However, different characteristics of the countries make it difficult to propose a standard approach to overcome the problems. Developing “new” indicators with transdisciplinary work might be useful in this sense.Key messagesFood (in)security and climate change have “complex” interactions.Transdisciplinary approach may facilitate proposing realistic solutions.

As the global economy thrives and pushes for sustainable growth, there are also a plethora of non-economic challenges arising from the respective dimensions of insecurity and geopolitical tensions such as inter- and intra-country conflicts. Geopolitical risk mostly arises from security tensions, war, and terrorist incidents, which hamper peaceful inter-country and regional cooperation, thus endangering state institutions such as financial institutions. Given this observation, the current study examines the relationship between the geopolitical risk index and bank indices by employing the bootstrap panel causality approach over a monthly period from September 2003 to December 2018. In this case, the causality analysis of the geopolitical risk index and bank indices for six (6) countries (China, Indonesia, Israel, Philippines, Saudi Arabia, and Turkey) was performed. Importantly, the investigation found causality only from the geopolitical risk index to bank indices in Turkey and Israel. Given the statistical evidence from the study, we offer related policy recommendations, especially for the examined countries.

Geopolitical risk, encompassing wars, terrorism, and tensions between states, exerts a significant impact on global affairs. Previous studies have examined the relationship between geopolitical risk and military spending. However, these studies were limited by certain shortcomings in the measurement tools used to assess geopolitical risk. The introduction of a new geopolitical risk index, leveraging textual analysis technology, offers a way to overcome some of these limitations. Despite this advancement, research exploring the predictive capacity of this geopolitical risk index on military spending behaviour remains scarce. Specifically, no previous studies have investigated the predictive power of both local and global geopolitical risk indices on military spending behaviour. To bridge this gap, this study employs panel VAR analysis for 34 countries worldwide, spanning from 1993 to 2022. The results indicate that the military spending behaviour of countries is significantly influenced by local geopolitical risk rather than global geopolitical risk. Furthermore, the findings also reveal that an increase in geopolitical risk during a given year can predict military spending behaviour in the subsequent 2 years. These findings provide valuable insights for policymakers seeking to understand governments' behaviour regarding military spending.

PurposeOur aim in this study is to investigate the relative importance of the economic policy uncertainty and of the geopolitical risk on U.S. REITs (Real Estate Investment Trusts) returns with a special focus on the different real estate sectors.Design/methodology/approachWe use an augmented Fama-French (1993)’s asset pricing model, including economic policy uncertainty indices (EPU), introduced by Baker et al. (2016), and geopolitical risk indices (GPR) recently developed by Caldara and Iacoviello (2022), to price the potential risk factors for U.S. Nareit indices returns. To obtain robust economic results, we correct for the problems of errors-in-variables in linear asset pricing models; we advocate the use of higher moments estimators as instruments in a generalized method of moments (GMM) framework.FindingsOur results report that economic policy uncertainty (EPU), and geopolitical risk (GPR) are priced for the different Nareit sectors for the last three decades. The GPR index stands as a relevant risk factor. The coefficient estimates are low compared to Fama-French risk factors. They are higher for Shopping Centers, Retail and Region Malls and lower for Health Care and Lodging/Resorts. EPU indices are also priced and less statistically significant. Health Care sector, followed by Shopping Centers and Retail are the most policy-sensitive sectors.Practical implicationsIn their “2023–2024 Top Ten Issues Affecting Real Estate” “political unrest and global economic health” is ranked 1 issue by the Counselors of Real Estate. Our results report that economic policy uncertainty and geopolitical risk are priced for the different Nareit sectors. They suggest implications for investors, insurers, bankers, policymakers and other stakeholders. The geopolitical risk index (GPR) stands as a relevant and significant risk factor for REITs returns.Originality/valueBased on parsimonious robust asset pricing models, the results shed a new light on the relative importance of geopolitical risk and economic policy uncertainty in the real estate sector, with a special focus on the different U.S. REITs sectors. They suggest possible implications for investors, insurers, bankers, policymakers and other stakeholders in a context marked by higher uncertainty shocks and geopolitical risks.

Geopolitical tensions can affect the stability of companies, including Indonesia's banking sector. Geopolitical risk, as measured by the Geopolitical Risk Index (GRI), is an external factor that reflects economic and political uncertainty arising from global adverse events. This study aims to understand the dynamics of the interaction of geopolitical risk on the stability of banking indicators, including ROA, ROE, CAR, and NPL. Furthermore, this study aims to assess financial resilience in the banking sector amid geopolitical tensions. Sampling was conducted across banking categories, including KBMI 4, KBMI 3, Islamic banks, and regional development banks. The data used are quarterly panel time series from 2015 to 2024. The analysis was conducted using Panel Vector Autoregression (PVAR) with the Generalised Method of Moments (GMM) approach. The results show that the impact of the GRI shock on banking indicators is short to medium-term, with the most significant effects on profitability (ROA, ROE) and credit quality (NPL). The results confirm that global geopolitical pressures play a dominant role in explaining fluctuations in bank indicators in Indonesia, particularly capital efficiency and capital structure. Based on the dynamics of these interactions, Bank A, Bank B, Bank D, and Bank E are classified as more resilient, and Bank C, Bank F, Bank G, and Bank H are classified as less resilient. More resilient banks are characterised by a low GRI impact on ROA and CAR, and a quick return to stability, while less resilient banks have a high GRI impact on ROE and CAR.

The geopolitical risk (GPR) can be described as the risk connected with some crisis (e.g., wars, terrorist attacks, and conflicts between nations). Besides many other characteristics, OPEC+ countries are prone to risks and uncertainties. According to Bloom (2009) uncertainty is a broader concept that reflects ambiguity in the minds of decision-makers and policymakers about the possible future that spreads across macroeconomic to microeconomic levels. For instance, volatilities in GDP growth and oil prices affect investment decisions, plants' production schedule and individual's consumption habits. Researchers use different proxies of uncertainty that ranges from economic data such as volatility of oil prices, stock markets and GDP to news published in daily papers (Baker, Bloom, and Davis, 2016) since its broader existence implies no specific measures (Bloom, 2009). Extent empirical literature affirms significantly negative effects of uncertainty on the entire economy. Caldara and Iacoviello (2018) have introduced a new-based global uncertainty index, which covers country-specific and region-specific uncertainties measures. They included all words, linked with geopolitical tensions and are exogenous to macroeconomic uncertainties, published in 11 prominent newspapers. This geopolitical risk (GPR) index identified events such as 'Paris assaults', 4 'Iraq invasion', 'tensions during Gulf Wars', and '9/11 WTC attacks in USA'. Geopolitical risks such as wars, terrorist acts, military attacks, or diplomatic conflicts around the world are of major concern to businesses, financial market participants, public media, and policy makers. Considering the novelty and the significance of GPR, we investigate the impacts of geopolitical risks on three key elements of OPEC+ countries that have also global implication: economic growth, oil prices and energy exports. Keywords: Geopolitical risks, , renewable energy, OPEC+ countries.

Previous studies have found that geopolitical risk (GPR) caused by geopolitical events such as terrorist attacks can affect the movements of asset prices. However, the studies on whether and how these influences can explain and predict the volatility of stock returns in emerging markets are scant and emerging. By using the data from China’s CSI 300 index, we provide some evidence on whether and how the GPR factors can explain and forecast the volatility of stock returns in emerging economies. We employed the GARCH-MIDAS model and the model confidence set (MCS) to investigate the mechanism of GPR’s impact on the China stock market, and we considered the GPR index, geopolitical action index, geopolitical threat index, and different country-specific GPR indices. The empirical results suggest that except for a few emerging economies such as Mexico, Argentina, Russia, India, South Africa, Thailand, Israel, and Ukraine, the global and most of the regional GPR have a significant impact on China’s stock market. This paper provides some evidence for the different effects of GPR from different countries on China’s stock market volatility. As for predictive potential, GPRAct (geopolitical action index) has the best predictive power among all six types of GPR indices. Considering that GPR is usually unanticipated, these findings shed light on the role of the GPR factors in explaining and forecasting the volatility of China’s market returns.