Geopolitical Risk Research Articles

The interplay among corporate bonds, geopolitical risks, equity market, and economic uncertainties

This study examines the dynamic interconnectedness and dependence between the USA’s corporate bond market (CMD) and economic and equity market uncertainties, as well as geopolitical risk. Using quantile Vector Autoregressive (QVAR) and Wavelet Local Multiple Correlation (WLMC) techniques, we place particular emphasis on the periods corresponding to the Russian–Ukrainian war and the COVID-19 pandemic. We find significantly higher interconnectedness, particularly at the upper quantile and large scale, during these two events, lending support to the use of asymmetric models. Additionally, our findings reveal that the impact is more robust when uncertainty increases compared to periods of decreased uncertainty. These results carry vital implications for policymakers and macro-prudential authorities, emphasizing the necessity to consider a changing macroeconomic environment and to reduce dependence on Russian energy sources to navigate a complex and evolving financial landscape.

A news-based economic policy uncertainty index for Nigeria

In this study, we develop the first daily news-based Economic Policy Uncertainty (EPU) index for Nigeria, which was previously not covered in recent EPU indices. The need to track economic uncertainties in Nigeria becomes crucial for investment and policy, especially with the renewed interest in the country as an important investment destination. To construct the EPU index, we use relevant keywords from articles in prominent newspapers in the country, covering the aftermath of the global financial crisis and the COVID pandemic, with a data scope of January 2010 to November 2022. We evaluate the predictability of the index by examining its connection with economic and financial variables like exchange rates, stock prices, and inflation in Nigeria. The results are robust to alternative model specifications, data frequencies, and multiple forecast horizons. We hope to extend this exercise to other useful indices, including Geopolitical Risk, Financial Stress Indicators, and Monetary Policy Uncertainty, which are not readily available for Africa, including Nigeria.

The impact of the proportion of renewable energy consumption on geopolitical risks in the United States and the United Kingdom

Renewable energy serves as an effective alternative to traditional fossil fuels, reducing reliance on energy imports from specific countries, thereby alleviating geopolitical risks and ensuring national energy security. The development and utilization of renewable energy have profound implications for the global energy consumption structure and geopolitical landscape. This paper utilizes time-series and panel data from 1990 to 2020 to examine the causal relationship between renewable energy consumption and geopolitical risks. Focusing primarily on the United States and the United Kingdom, a multivariate regression model was developed for empirical analysis, with a comparative analysis conducted against other Group of Seven (G7) member countries. Subsequent robustness checks were performed to further validate the model's robustness. Additionally, this study explores the role of military strength as a moderating variable in the relationship between renewable energy and geopolitics. Lastly, a vector autoregression model was constructed to analyze the dynamic relationships between renewable energy and related variables. The findings reveal that (1) consumption of clean renewable energies, such as solar, wind, and tidal energy, significantly reduces geopolitical risks in the United States and the United Kingdom, with differing empirical results for France, Canada, and Japan, interpreted according to their developmental contexts and (2) increased defense expenditure in the US and the UK significantly enhances the positive impact of renewable energy consumption on mitigating geopolitical risks. Utilizing renewable energy not only diversifies national energy options but also reduces reliance on fossil fuels and fosters international cooperation, thereby easing geopolitical tensions. This research enriches the literature on the relationship between renewable energy consumption and national energy security in key global nations and offers theoretical insights for the formulation and implementation of national energy development strategies in the new world development paradigm.

Navigating the green growth spectrum: Exploring the synergy between geopolitical risk, environmental policy stringency, and green production practices

The deepening understanding of the environment has heightened our perception of the causes of environmental damage, promoting a shift from combating pollution to preventing it with a core emphasis on environmental protection. Academicians and governance authorities have shifted their focus from traditional production practices to green production practices (GPP). The current body of literature has explored the impact of GPP on environmental quality. Whereas, the implications of geopolitical risk (GPR) and environmental policy stringency (EPS) on GPP are still unexplored. Keeping in view these gaps in existing research, this research is the earliest endeavor to examine the impact of GPR and EPS on GPP for the group of seven (G-7) countries from 1990 to 2020. In this regard, we have applied panel quantile regression (PQR) which allows for a more flexible treatment of heterogeneity and is robust to deal with outliers and skewed distributions compared to traditional panel data techniques. The empirical findings reveal that GPR has a significant destructive impact on GPP whereas, the EPS upsurge the GPP in G-7 countries. Founded on the factual outcomes, we recommend policy recommendations to achieve the objectives of SDG 07 (affordable and clean energy), SDG 08 (exports for decent economic growth), SDG 09 (industry innovation and infrastructure), SDG 11 (sustainable cities and societies), SDG 12 (responsible consumption and production), SDG 13 (environmental policies for climate action), and SDG 16 (conflict, peace, and justice strong institutions).

Geopolitical risk and the cost of capital in emerging economies

We posit that geopolitical events that elevate investor risk prompt equity investors to shift capital from emerging markets to safer mature markets, raising the cost of equity capital for firms in emerging economies. Using a sample of 55,900 observations spanning 19 economies from 1987 to 2018, we find that higher geopolitical risk increases the cost of equity capital, on average. We further find that this effect is moderated by country-level institutional context (constraints on the executive branch of government and regulatory arrangements) and firm-level factors (cross-listing in the U.S. and foreign sales).

The Mediating Role of Investment Actuaries in the Relationship between Banking Sector Risks and Geopolitical Risks

The Mediating Role of Investment Actuaries in the Relationship between Banking Sector Risks and Geopolitical Risks

The geoeconomics of protecting profits from migrants in maritime distress

AbstractCommercial vessels play a significant role in rescuing migrants on the Mediterranean. There are physical and financial risks to performing these commercial rescues that are poorly understood and often ignored. For ship captains, migrants in maritime distress embody the close linkages between geoeconomic and geopolitical risk. I argue that the negotiation of migrant rescues by commercial shipping captains captures the ways in which geoeconomic and geopolitical security‐seeking discourses become entangled and contradictorily embodied in everyday life and suffering. The rationale and logic that underwrite the securitisation of the supply chain is the discursive site where geopolitical and geoeconomic strategy define the risks in maritime rescue space. This study extends from a conceptual framework that identifies the spatial structuring of an ongoing dialectic between geopolitical and geoeconomic strategy as a defining feature of geoeconomic analyses. The research is based on interviews with 24 maritime professionals and a series of freedom of information requests to the European Border and Coast Guard Agency (Frontex) for information about rescues involving commercial ships. This paper contributes new information on the human geography of maritime rescues that involve commercial ships and migrants in the Central Mediterranean.

Corporate cash holding and firm’s performance in times of Ukraine war: a literature review and way forward

Corporate cash holding and firm’s performance in times of Ukraine war: a literature review and way forward

Are metaverse coins more prone to geopolitical risk than traditional crypto assets?

The present research explores the nexus of geopolitical risk (GPR) with metaverse coins and traditional crypto assets. We apply wavelet-based techniques to capture their time-varying relationships and casual nexus at different scales. Based on 776 observations from November 04, 2020, to December 19, 2022, for each time series, we find that GPR does not impact metaverse coins in the short run. Conversely, some of the traditional crypto assets are influenced by the GPR in the short, medium, and longer runs. Metaverse coins are slightly less prone to GPR than traditional crypto assets. The results can be utilized for risk mitigation and investment diversification.

Understanding the Factors That Influence Foreign Direct Investment in Turkey: Exploring the Impact of Country Risks and Geopolitical Risk

The primary objective of this study is to investigate the determinants of foreign direct investment, with a specific focus on per capita GDP (GDP), alongside various risk factors including economic risk (ER), financial risk (FR), political risk (PR), and geopolitical risk (GPR), in the context of Turkey. This investigation employs an innovative wavelet methodology to analyze the relationships among these variables. The empirical analysis entails the application of wavelet coherence, as well as multiple wavelet coherence (MWC) and partial wavelet coherence (PWC) techniques, to evaluate the strength and significance of relationships between different time series while considering the influence of other related time series. Utilizing quarterly data spanning from 1988Q1 to 2020Q4, this study seeks to fill a gap in the existing literature by examining the nexus between these factors in both time and frequency domains, a novel approach in this field. The findings from the wavelet coherence analysis reveal that GDP, PR, FR, and ER positively impact FDI inflows, whereas GPR exerts a negative influence across various time and frequency intervals. Moreover, the outcomes of MWC and PWC analyses underscore the significant effects of the control variables on the relationships under investigation. Based on these findings, the study puts forth noteworthy policy implications aimed at fostering a more conducive environment for FDI in Turkey.

Geopolitical risk exposure and stock returns: Evidence from China

This study explores the effect of geopolitical risk on stock returns in China. We identify a significant premium associated with low geopolitical risk exposure: stocks with lower geopolitical risk exposure outperform the ones with higher geopolitical risk exposure in the ensuing months. Our findings suggest that this premium is not attributable to risk-adjusted factors or recognized common pricing factors. Moreover, the robustness of this premium can be demonstrated by a range of alternative settings. Finally, we provide a potential explanation for the low risk exposure premium: geopolitical risk shocks lead to increased investor attention, making investors more inclined to purchase stocks with low risk exposure to hedge against geopolitical risk.

Achieving environmental sustainability goals through capitalizing on renewable energy channels: Role of green finance, resources productivity and geopolitical situation in the MENA region

Environmental sustainability is essential to the country's financial position and economic growth. Geopolitical situations and green activities significantly contribute to enhancing sustainable development goals. The purpose of this study is to evaluate the impact of green finance, investment in renewable energy sources and geopolitical risk on the environmental sustainability of the Middle East and North America (MENA) region over the period 2000–2021. When using a cross‐sectional dependence autoregressive distributed lag model (CS‐ARDL), it is discovered that a rise in geopolitical risk will decrease environmental performance in the form of carbon dioxide emission. At the same time, the other factors (green finance and investment in renewable energy) have a positive relationship with sustainability. This observation can be ascribed to the association between increased geopolitical risk and the inclination of crude oil consumers, who are most affected by such risk, to contemplate renewable energy as an alternative to conventional energy sources. This finding could also be attributed to the fact that clean energy is becoming more affordable. In addition, the augmented mean group model findings provide more evidence that a negative linkage is found between geopolitical risk and environmental sustainability. The findings have repercussions for regulators as well as investors who are active in the renewable energy markets.

Financial globalization and economic growth amid geopolitical risk: A study on China-Russia far East federal district

Geopolitics, natural resource efficiency and financial globalization have arisen as a new concept for low CO2 to achieve sustainable economic growth (EG). Therefore, developed and developing economies focus on Geopolitics risk (GPR), natural resource (NRS) efficiency and financial globalization (FG) to cope with CO2 neutrality targets. In order to understand the elements that contribute to achieving CO2 neutrality, this study sought to establish a relevant connection between geopolitics, the efficiency of NRS, financial globalization (FNG), and economic growth. For the abovementioned objectives, modern econometric methods, such as the canonical cointegration, CS-FGLS and GMM were adopted to evaluate the China-Russia Far East dataset between 1990 and 2022. In order to achieve CO2 neutrality in the long run, the study's elements are crucial, according to the results. In addition, GMM shows that each of the parameters affects CO2 neutrality. As a result, the ecological Kuznets curve rules the economic landscape, and long-term CO2 neutrality is greatly facilitated by geopolitics, efficient use of natural resources, financial globalization, and economic growth. Consequently, numerous domains necessitate far-reaching and revolutionary policy changes, such as economic integration to mitigate geopolitical risk, effective management of natural resources, efficient financial systems, and sustainable technology.

The impact of geopolitical risk, institutional governance and green finance on attaining net-zero carbon emission

This research investigates the impact of geopolitical risk, institutional governance and green finance on environmental outcomes, specifically focusing on carbon emissions and ecological footprint. Utilizing the dynamic CS-ARDL method and aggregated mean group analysis on a panel dataset covering 21 nations from 2000 to 2021, our findings reveal that heightened geopolitical risk leads to both short and long run increases in carbon emissions and the ecological footprint. Our study finds both a direct as well as indirect connection between governance, green finance and environmental outcomes in both the short and long run, highlighting the nuanced impact of governance on the formulation of environmental policies and regulatory frameworks. The results emphasize the need for targeted strategies, including focused investments and incentives for sustainable finance, particularly in conflict-affected regions. Furthermore, our research underscores the enduring impact of historical events, such as wars, on contemporary environmental indicators, emphasizing the importance of proactive conflict prevention measures. Our research suggests that policymakers should adopt comprehensive strategies that prioritize emission reduction during short-run spikes in geopolitical risk while maintaining a steadfast commitment to long-run sustainability.

Regional features of the manifestation of demographic threats in terms of characteristics of marriage, motherhood and childhood

The subject of the research is the regional characteristics of demographic indicators of marriage, motherhood and childhood, their relationship with the indicator of natural growth. At the same time, the natural decline of the population is considered as one of the key threats to the demographic and, consequently, national security of the population of the Russian Federation, since it entails a number of economic and geopolitical risks. The variability of indicators of marriage, motherhood and childhood is considered in the study as a possible source of variability in natural growth. Therefore, the regional peculiarities of the numerical characteristics of each of these features are analyzed in detail. Special attention is paid to regions showing abnormal values. In addition, the nature of the influence of individual indicators of marriage, motherhood and childhood on the natural growth rate has been studied in order to identify key factors determining the variability of the latter. The paper uses methods of exploratory data analysis: elements of descriptive statistics and diagrams to demonstrate trends . The closeness of the relationship between the indicators of the natural growth coefficient and the indicators of marriage, motherhood and childhood is also determined and a model of linear regression of the natural growth coefficient on the total fertility rate is constructed. The authors' contribution to the development of the topic is that, despite the simplicity of the stated methods, the study allowed us to identify regions with specific features in one or more indicators of marriage, motherhood, childhood, as well as natural growth. Further study of the features of regional demographic policy, the state of health, and cultural characteristics of the selected regions will allow us to borrow positive experience and correct negative trends, which should lead to a decrease in the factors determining the depopulation of the Russian population in terms of marriage, motherhood and childhood. The regression model allowed us to conclude that measures are needed to increase the total fertility rate, since, among the factors considered, the natural growth rate turned out to be the most sensitive to this trait, which simultaneously characterizes the propensity of women to motherhood and the intensity of fertility

Comparative investment analysis between crypto and conventional financial assets amid heightened geopolitical risk

This empirical research study aims to investigate the asymmetric spillovers among crypto and key financial assets such as gold, equity, bonds, and the dollar-to-ruble exchange rate volatility, focusing on new developments during the Russia-Ukraine conflict in 2022. Utilizing time- and frequency-domain methodologies, this study conducts an in-depth analysis employing daily frequency data from January 01, 2018, to May 30, 2023. The study employs value at risk and conditional value at risk estimations to assess potential losses in the portfolio during the crisis. The findings reveal that Bitcoin exhibits hedging ability, enabling investors to diversify risk among the underlying financial assets. The study observes a significant increase in Bitcoin investments during the crisis, leading to heightened volatility and uncertainty. Negative news has a stronger impact compared to positive news, underscoring the importance of prudent asset allocation for risk mitigation. The implications of our findings are particularly significant for financial policymakers and trade partners of Russia. The study urges them to differentiate their short- and long-term strategies and procurement contracts. In the long run, policymakers should be cognizant of the influence of the riskiness of crypto assets during economic crises, guiding the formulation of prudent policies and investment decision-making initiatives.

Do Geopolitical Risk and Economic Uncertainty Harm Bank Credit ?

Do Geopolitical Risk and Economic Uncertainty Harm Bank Credit ?

Incorporating platinum circular economy into China's hydrogen pathways toward carbon neutrality.

Hydrogen is gaining tremendous traction in China as the fuel of the future to support the country's carbon neutrality ambition. Despite that hydrogen as fuel largely hinges on the supply of platinum (Pt), the dynamic interlinkage between Pt supply challenges, hydrogen development pathways, and climate targets in China has yet to be deeply analyzed. Here, we adopt an integrated assessment model to address this important concern and corresponding strategies for China. The results indicate that the booming hydrogen development would drive China's cumulative demand for Pt metal to reach 4,200-5,000 tons. Much of this demand, met through a limited supply pattern, is vulnerable to price volatility and heightened geopolitical risks, which can be mitigated through circular economy strategies. Consequently, a coordinated approach to leverage both global sustainable Pt sourcing and a robust domestic Pt circular economy is imperative for ensuring cost-effective hydrogen production, aligned with a climate-safe future.

Investor behavior in times of conflict: A natural experiment on the interplay of geopolitical risk and defense stocks

We examine the connectedness of aerospace and defense companies and their relation to measures of geopolitical risk. With hierarchical clustering, we find stable and localized company clusters. Increasing geopolitical risk leaves these clusters intact but strengthens inter-cluster connectedness. Focusing on intraday data, we find that for most companies, instantaneous news arrival in form of jumps impacts realized volatility significantly. Further, we show that different measures of geopolitical uncertainty (GPR and COVOL) have differing impact on short-term predictions of intraday volatility, underlying the importance to distinguish between different sources of uncertainty. We provide evidence that investors react instantaneously to increases in geopolitical risk with some persistence of these shocks. The COVOL index holds significant informational content for short- and medium-term predictions of realized volatility of global aerospace and defense companies.

KAJIAN MENGENAI PEMANFAATAN PERHUTANAN SOSIAL DALAM PERDAGANGAN KARBON DI INDONESIA UNTUK MENGHADAPI PERUBAHAN IKLIM

Global warming and climate change have become one of the most pressing environmental issues facing global society today. Efforts to reduce greenhouse gas (GHG) emissions, especially carbon dioxide (CO2), have become the main focus in efforts to mitigate the negative impacts of climate change. One of the instruments introduced to reduce carbon emissions is carbon trading. In Indonesia, the social forestry program is an initiative that aims to empower local communities in sustainable forest management, which is closely related to the concept of carbon forests. Through community participation in social forestry programs, it is hoped that harmony can be created between the interests of nature conservation and sustainable economic development. This article aims to provide a comprehensive understanding of the concept of carbon trading, its basic principles, benefits, and implementation through social forestry in Indonesia. This research uses a literature review method to present a comprehensive overview of this topic, by combining and analyzing information from various available sources. By understanding the basic concepts of carbon trading, operational principles, and involving communities in forest management, Indonesia has great potential to reduce carbon emissions and improve the welfare of local communities while preserving tropical forests that are rich in biodiversity. Keywords: Russia-Ukraine War, Global Economy, Geopolitical Risk