Geopolitical Uncertainty Research Articles

Analysis of changes in HSBC’s income statement between 2022-2023

The banking industry is a cornerstone of the world wide economy, primarily due to the unique nature of its primary product—money. This sector has long held a central role within society and continues to attract considerable interest from potential investors. However, investing in the banking industry is not without its challenges. Market volatility, regulatory compliance costs, and geopolitical uncertainties can profoundly impact the industry’s profitability and stability. Being among the biggest banks in the world, HSBC provides financial services such as personal banking, wealth management, and corporate finance in over 60 countries. This is an excellent example of an analysis of the banking sector. The essay lists changes in HSBC’s income statement between 2022 and 2023 and analyses them using vertical and horizontal analysis, ratio analysis, segment reporting analysis, and benchmarking. Through these analyses, the essay aims to see HSBC’s capacity to face banking crises and provide a few suggestions for investors.

Developing theoretical models for effective debt service management in high-volatility industries: a focus on risk mitigation and financial stability in the oil and gas sector

Effective debt service management is crucial for maintaining financial stability and mitigating risks in high-volatility industries, particularly in the oil and gas sector. This abstract explores the development of theoretical models aimed at enhancing debt service management practices in such industries. The oil and gas sector is inherently exposed to price volatility, geopolitical uncertainties, and regulatory challenges, necessitating robust strategies for managing debt obligations. This review emphasizes the importance of integrating risk mitigation techniques into debt service management frameworks to safeguard against financial distress and optimize capital structure efficiency. Key theoretical models examined include proactive debt restructuring, dynamic financial modeling, and scenario analysis tailored to the cyclical nature of the industry. These models emphasize adaptive strategies that enable companies to adjust debt repayment schedules based on market conditions and cash flow projections. Additionally, financial stability metrics such as debt-to-equity ratios, liquidity ratios, and debt coverage ratios are utilized to gauge the sector's resilience to external shocks. Incorporating risk management principles into debt service management frameworks enhances decision-making processes, facilitates early detection of financial vulnerabilities, and ensures alignment with long-term strategic goals. Case studies and empirical data illustrate the practical application of theoretical models in optimizing capital allocation and maintaining investor confidence amid industry fluctuations. The theoretical insights presented contribute to a comprehensive understanding of effective debt service management in high-volatility industries, highlighting the role of financial prudence and strategic foresight in sustaining operational resilience. Recommendations are provided for industry practitioners and policymakers to enhance regulatory frameworks, promote transparency, and foster sustainable growth in the oil and gas sector.. Keywords: Debt Service Management, Risk Mitigation, Financial Stability, Oil and Gas Sector, High-Volatility Industries, Theoretical Models, Debt Restructuring, Financial Modeling, Scenario Analysis, Capital Structure

Trade facilitation, market size, and supply chain efficiency of Taiwan semiconductor companies.

In an environment marked by global economic volatility and geopolitical uncertainties, the stability of Taiwan's supply chain takes on heightened importance, particularly given Taiwan's crucial role in the global semiconductor supply chain. In recent years, semiconductor companies in Taiwan have faced increasing inventory pressures, which will reduce their competitiveness and increase operational costs over the long term. Although previous studies have explored the influence of trade facilitation on macroeconomic and trade efficiencies, its specific impacts on the semiconductor industry have been less frequently addressed. This study integrates corporate inventory, trade facilitation, and geopolitical factors within a unified analytical framework to construct a model that explores mediating and moderating effects. This study conducted regression analysis on data from 52 Taiwan-listed integrated circuit companies from 2014 to 2022. Contrary to traditional findings that trade facilitation decreases inventory in other industries, it predominantly fosters inventory accumulation within Taiwan's semiconductor sector by expanding market size, thereby affecting supply chain efficiency. Moreover, geopolitical factors were found to intensify the effects of trade facilitation on corporate inventory. Elevated geopolitical risks lead to greater inventory accumulation, which ultimately threatens long-term competitiveness and diminishes the semiconductor industry's advantage in Taiwan, further influencing supply chain efficiency. Consequently, this study recommends that to more accurately forecast market size, semiconductor companies in Taiwan are encouraged to expand their manufacturing investments in Chinese mainland. Additionally, the prudent handling of cross-strait relations by the Taiwan authorities is an important strategy to mitigate geopolitical risks affecting the semiconductor supply chain.

Navigating tensions of sustainable supply chains in times of multiple crises: A systematic literature review

AbstractThe challenges posed by multi‐crisis environments, such as pandemics and geopolitical uncertainties, create significant opportunities for supply chains (SC) to enhance their sustainability, resilience, and agility, thereby developing a strategic advantage. However, seizing these opportunities is not without its challenges; critical tensions inevitably arise. This paper, based on a systematic review of 287 SC studies, identifies and discusses five key tensions: (1) increased trade‐offs between sustainability and efficiency; (2) competing priorities between SC sustainability and resilience; (3) mismatched sustainability expectations causing stakeholder pressure; (4) conflicting demands between global and sustainable operations; and (5) unintended consequences of technological innovation, disadvantaging stakeholders with limited resources and capabilities. To mitigate these tensions while leveraging on the opportunities, the study proposes several strategic pathways, including adopting circular economy principles, optimizing inventory and distribution management, employing holistic measurement and forecasting, balancing risk‐hedging with proactive risk management, fostering inclusive stakeholder engagement, balancing globalization and regionalization, and integrating advanced digital technologies alongside with SC ecosystem wide change management. These strategies offer practical guidance for building sustainable and crises‐ready SCs and set the stage for an extensive research agenda to further explore SC sustainability in multi‐crisis environments.

Possible Contours of Developing International Trade in the Perimeter of Global Value Chains under the Conditions of New Reality

The transition from hyperglobalization to slowgbalization that began after the 2008 global financial crisis has increased skepticism about the future of globalization and motivation to adjust the architecture of international trade. The subsequent series of global shocks – the aggravation of the US-Chinese trade relations, the COVID-19 pandemic, the events in Ukraine in 2022-2023 – aggravated the situation, exacerbating the problem of stopping the negative consequences of the disruption of supply chains of goods and services. The purpose of the article is to clarify the contours of restructuring and outlooks for the development of cross-border trade in the context of new reality: the imposition of global shocks, increasing geopolitical uncertainty and increasing fragmentation of the world economy. The object of the study is the international trade in the perimeter of global value chains (GVCs), whose share in world trade increased from 34.93% in 1995 to 45.24% in 2007 and, after falling to 43.49% in 2020, quickly recovered and increased to 49.38% in 2022. The analysis of quantitative and structural shifts in GVC-trade was based on the methodology of structuring exports in the categories of value added by A. Borin and M. Mancini. The prospects for GVC-trade were assessed using the methods of identifying the “risk iness” of goods in the export-import turnover of S. Majune and V. Stolzenburg, the frequency of cross-border bilateral interactions of S. Liang, the agglomeration to global trade of K. Baris. The characteristics of the four main options for strengthening the resistance of GVCs in modern conditions are given – reshoring, diversification, regionalization and replication. The working hypothesis has been confirmed: all 4 considered trajectories are not mutually exclusive and none of them presupposes complete autarky of the country. The main conclusion is made, according to which the negative events in the global economy of the last decade reconfigured trade flows, accelerated the processes of regionalization of the global economy, but did not become a trigger for deglobalization.

Transformative Dynamics in Private Equity: Exploring Co-investment, ESG Integration and Digitalization Strategies

This paper delves into the evolving landscape of private equity (PE) financing, particularly in the context of the real estate and project development sectors amidst global economic fluctuations and geopolitical uncertainties. With traditional debt financing losing its sheen, the study focuses on the burgeoning role of PE, especially co-investment funds, as a viable financial alternative. Utilizing a rich dataset from reputable sources such as Morningstar, Pitchbook, and the European Central Bank, along with other pertinent studies, the paper presents a nuanced analysis of the declining PE transaction activity in 2023. It highlights how this downturn has catalyzed the adoption of innovative strategies, including the rise of “continuation vehicles” and the increasing significance of co-investments. Moreover, the research offers an insightful examination of the German SME sector, showcasing how PE can be a transformative force. It particularly emphasizes the incorporation of ESG (environmental, social, and governance) considerations and the advancement of digitalization within these enterprises. The study employs a mixed-methods approach, blending qualitative insights with a robust collection of both primary and secondary data. It argues that PE is not merely a financial instrument but a catalyst for meaningful business evolution, enabling German SMEs to effectively respond to current market challenges and undergo essential transformations. This paper aims to contribute to the broader understanding of PE’s role in contemporary business environments, offering valuable perspectives for academics, industry practitioners, and policymakers.

What drives the uranium sector risk? The role of attention, economic and geopolitical uncertainty

Interest in nuclear energy has increased recently due to its low-carbon footprint, energy security concerns, and technological advances. Despite the recent surge in uranium stocks, there is a lack of research on uranium sector volatility. We fill this gap by analyzing the volatility of the Global X Uranium ETF (URA) from 2010 to 2024 using high-frequency data. Our analysis reveals that HAR models effectively capture URA volatility. Market-wide implied volatility and investor attention, captured by Google search volume, are found to contain valuable information for forecasting uranium sector volatility in an in-sample context. In contrast, economic and geopolitical uncertainty, as well as global financial risk, exhibit limited relevance. Although advanced models show some improvement in out-of-sample predictions, the basic HAR model remains a robust benchmark.

Transformation Pathways: Drumul Taberei Neighbourhood - a Positive Energy District?

Abstract Positive Energy Districts (PED) have surged in prominence amidst Europe’s ambitious climate targets and the fluctuating energy landscape, influenced notably by geopolitical uncertainties such as the Ukraine conflict. Aligned with European and national priorities, which emphasises the renovation of its housing stock as part of the Renovation Wave initiative, PED emerges as a viable solution for urban areas. However, the challenge remains in how PED can address energy poverty, promote renewable energy, and align with renovation priorities of the outdated infrastructures (including buildings). The KINETIC project addresses PED transformation challenges at the neighbourhood level by deploying an intensive co-creation process for identifying key transformation directions. The Romanian DEMO area (along with DK and IT study cases) is the Drumul Taberei neighbourhood in Bucharest Sector 6, a dense neighbourhood composed of multifamily buildings realised in the 60s and 70s during the communist regime. The area needs comprehensive regeneration and renewal initiatives. If proven feasible through mathematical modelled data paired with strategic integrated planning, the outcomes of KINETIC for the Drumul Taberei neighbourhood will be able to revolutionise the future rehabilitation project of collective housing districts in Romania, and beyond. The paper will outline PED transformation pathways stemming from initial co-design workshops involving local stakeholders. It will also explore collaboration and investment prospects between municipality-housing associations and NGOs. Given the privately owned housing estate and state-funded rehabilitation, the project will assess innovative models to meet PED’s ambitious goals.

Bewährungsprobe Europas: Wettbewerbsfähigkeit in einer Welt im Wandel

Abstract Competitiveness is increasingly becoming a political focus. In times of geopolitical uncertainty, a trend of de-globalization and changing economic structures, the EU must assert itself as a business location in the competition between nations. Location characteristics such as a successful digital and green transformation in the face of increasingly scarce human capital, an incomplete internal market and inadequate defense capabilities are important. A high level of competitiveness is only possible with a European single market that is equipped with sufficient resources and a sound cooperation between the member states in the EU.

REACTION AND ADAPTATION OF THE STOCK MARKETS TO THE FULL-SCALE INVASION OF UKRAINE

This article investigates the reaction and adaptation of stock markets in response to the Full-Scale Invasion of Ukraine in February 2022. It examines the immediate effects on the Ukrainian stock market, highlighting the significant decline in trading volumes and stock prices due to geopolitical uncertainty. The study analyzes the behavior of major indices, including the PFTS and S&P 500, and explores investor sentiment during this crisis. Notably, while the S&P 500 experienced an initial drop, it rebounded as investors perceived a buying opportunity, reflecting resilience in more diversified markets. In contrast, the Ukrainian market faced severe disruptions, prompting regulatory responses and measures to restore confidence. The paper also considers gold’s reaction as a safe-haven asset, emphasizing its role in mitigating risks amid heightened geopolitical tensions. The findings underline the complexities of market dynamics during crises and the varying impacts on domestic and international investors.

Cryptocurrencies as a vehicle for capital exodus: Evidence from the Russian–Ukrainian crisis

Cryptocurrencies provide an escape from the conventional financial system and its regulations and could therefore become increasingly popular in the midst of geopolitical uncertainties. We analyze the linkage of the Russia–Ukraine conflict and the trading volume of 16 major cryptocurrencies via event study methodologies, based on a geopolitical risk index. The results show that the trading volume of most cryptocurrencies is positively affected by the events of the conflict. This is especially true for payment tokens and most utility coins. Interestingly, stablecoins show only fewer trading volumes before the actual event. Among utility tokens, Ripple in particular is positively influenced.

Geopolitical risks and energy transition: the impact of environmental regulation and green innovation

This study examines the impact of geopolitical risk on energy transition, focusing on the moderating roles of environmental regulations and green innovation within OECD countries. By employing a multivariate linear and nonlinear regression model, we identify a substantial positive effect of geopolitical risk on energy transition. Our analysis indicates that stronger environmental regulations and advancements in green innovation significantly amplify this effect. Through threshold effect bootstrap sampling tests, we detect a nonlinear relationship between geopolitical risk and energy transition at varying levels of environmental regulation and green innovation. We also explore lag effects, revealing that the influence of geopolitical risk on energy transition grows stronger over time. The inclusion of interaction terms in our analysis further clarifies the moderating influences of environmental regulation and green innovation. Utilizing a range of geopolitical risk indicators and regression methods, our findings are robust, consistently highlighting the proactive role of geopolitical risk in fostering energy transition. These insights highlight the importance of integrated strategies that harness environmental regulations and technological innovation to facilitate a resilient and efficient energy transition in the face of challenges posed by geopolitical uncertainties.

Determinants of Income Smoothing Practices in Light of the Recent Pandemic: Evidence from Banks in MEA Region

This study examined the effects of the recent COVID-19 pandemic on income smoothing practices in the banking sector of Middle Eastern and African (MEA) countries. It examined how global geopolitical risk (GPR) and the bank's internal indicators influenced these practices. Focusing on 175 banks across the MEA region with data spanning from 2018 to 2021. This study employed several econometric approaches, i.e., GMM, 2SLS, MMQR and QRPD, to provide robust estimations. The study's scientific novelty is in its thorough analysis of how COVID-19 stringency and global geopolitical uncertainties uniquely impact income smoothing practices, utilising advanced econometric techniques to capture nuances across different regions. The findings revealed that income smoothness has increased in response to stringent COVID-19 measures such as lockdowns and movement controls, with consistent results across various methods. Additionally, the higher global GPR is associated with increased income smoothness. The study also identified varying impacts of bank-specific factors: bank size, and capital adequacy ratio (CAR), generally show positive effects, while return on assets (ROA), cost-to-income ratio (CI), leverage (LEV), and liquidity (LIQ) often have negative impacts, with some variables displaying minimal significance in different quantiles. Practically, the study offers valuable insights for policymakers and banking sector professionals by highlighting how heightened COVID-19 stringency and geopolitical risks influence income smoothness. This can aid in the development of strategies to manage financial stability and adapt to future economic shocks.

Abstract C133: The missing cancer and palliative care in displaced community in Northeast India

Abstract Introduction: Cancer is a chronic illness needing long treatment. This includes late toxicity management in case of cure and palliative care if cure is a distant possibility. Northeast part of India shares international border with Bangladesh and both sides had witnessed geopolitical uncertainty since India’s independence in 1947. Unrest and military rule in East Pakistan made the citizens to flee to India which continued even after the creation of the new country Bangladesh in 1971. However, the poor migrants are not eligible under the public health scheme due to lack of proof of citizenship. Methods: We have analyzed the public health scheme and issues of migrants in Northeast India after observing discontinuity in care. Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY) is a national public health insurance scheme of the Government of India that aims to provide free access to health insurance coverage for low- income earners in the country. The scheme is applicable to Indian citizens. In 2019 Government of India passed the Citizenship Amendment Act (CAA) to provide Indian citizenship to the illegal migrants who entered India on or before 31st December 2014. However, the exercise to identify migrants as per the Act is a tedious process and not yet over.: Results: Until the exercise of granting citizenship under the Citizenship Amendment Act is done, the poor migrants who have no proof of citizenship cannot take benefit under AB PM-JAY scheme. Unfortunately, some internally displaced Indian citizens are lacking proof of citizenship and many of them are suffering from chronic illnesses and cancer, however neither afford to pay for treatment nor eligible to get free treatment under AB PM-JAY scheme. Conclusions: Northeast India migrant issue is a special situation where poor migrants from other country and some displaced poor Indians are not eligible to get cancer care under public health insurance scheme. The Citizenship Amendment Act provides a solution by granting citizenship. However, the tedious process is taking long time and no solution being offered in the interim period. Citation Format: Suryakanta Acharya. The missing cancer and palliative care in displaced community in Northeast India [abstract]. In: Proceedings of the 17th AACR Conference on the Science of Cancer Health Disparities in Racial/Ethnic Minorities and the Medically Underserved; 2024 Sep 21-24; Los Angeles, CA. Philadelphia (PA): AACR; Cancer Epidemiol Biomarkers Prev 2024;33(9 Suppl):Abstract nr C133.

Quantile and time-frequency spillover between rare earth and its interlinked markets: A geopolitical perspective

Underlying vulnerability of geopolitical risk for rare earth markets and its interlinked markets motivated this research is to explore their nexus by using different connectedness models. In doing so, the current study employed three diversified set of methodologies namely, quantile vector autoregression, BK framework, and cross-quantilogram to investigate connectedness structure across different market conditions. The dataset of this study spanning from March 29, 2018 to April 28, 2023, covering several turmoil periods. Surprisingly, the empirical findings reveal significant evidence of connectedness between all markets. Notably, in lower quantile, geopolitical uncertainty, rare earth, and green energy stocks are the major transmitters, while oil is the major receiver. At the same time, rare earth, clean energy, technology, natural resource markets, and all green energy tokens except carbon are the significant transmitters in the upper quantile. In contrast, BK measures demonstrate that total frequency connectedness is more significant in the short and long run. While, cross-quantilogram results reveal that connectedness is more pronounced in the long run for rare earth, clean energy, technology, and mining stocks. Specifically, it is important to note that spillover effect are more substantial and differ across different crisis episodes. In addition, large swings in the connectedness index between geopolitical risk and chosen markets is observed after the escalation of the Russia-Ukraine War. The empirical results offer several important implications for investors and policymakers to apply effective risk management techniques and safeguard investments especially during economic turbulence.

Examining market synchronicity: spillover connectedness among commodity markets and exchange rates during crisis periods

We investigate the dynamic spillover connectedness between commodity markets (gold and crude oil) and exchange rates in seven of the world's most influential developed and emerging economies: China, Ukraine, Germany, the United Kingdom, Japan, Russia, and the United States. Utilizing an extensive daily dataset sourced from Bloomberg, we analyze key exchange rates and commodity markets, focusing on currencies and economic indicators of significant global economies. Our findings reveal significant spillover effects across markets, with major currencies playing central roles in transmitting volatility during crisis periods. Specifically, currencies like EUR/$ and GBP/$ exhibit substantial internal spillovers, reflecting robust interconnectedness within these markets. In contrast, commodities such as crude oil demonstrate a more insulated nature, transmitting fewer spillovers compared to exchange rates. Furthermore, our analysis during distinct crisis periods, including the Covid-19 pandemic, the Russia-Ukraine conflict, and the Israel-Palestine war, highlights evolving market dynamics amidst geopolitical uncertainties. Major currencies continue to play pivotal roles during crises, transmitting the highest total spillovers, while commodities like gold emerge as significant transmitters and receivers, underscoring their role as safe-haven assets.

Forecasting CPI inflation under economic policy and geopolitical uncertainties

Forecasting consumer price index (CPI) inflation is of paramount importance for both academics and policymakers at central banks. This study introduces the filtered ensemble wavelet neural network (FEWNet) to forecast CPI inflation, tested in BRIC countries. FEWNet decomposes inflation data into high- and low-frequency components using wavelet transforms, and incorporates additional economic factors, such as economic policy uncertainty and geopolitical risk, to enhance forecast accuracy. These wavelet-transformed series and filtered exogenous variables are input into downstream autoregressive neural networks, producing the final ensemble forecast. Theoretically, we demonstrate that FEWNet reduces empirical risk compared to fully connected autoregressive neural networks. Empirically, FEWNet outperforms other forecasting methods and effectively estimates prediction uncertainty, due to its ability to capture non-linearities and long-range dependencies through its adaptable architecture. Consequently, FEWNet emerges as a valuable tool for central banks to manage inflation and enhance monetary policy decisions.

Impact of geopolitical risk on green international technology spillovers: FDI and import channels

This study investigates the impact of geopolitical risk (GPR) on green international technology spillovers through foreign direct investment (FDI) and import channels. The research aims to understand how GPR influences the transfer of green technologies, which are crucial for sustainable development, particularly in developing countries. Utilizing data from 30 Chinese provinces from 2003 to 2019, our findings indicate that increased GPR significantly hinders green technology spillovers through both FDI and imports. Additionally, the research demonstrates that advancements in local green technology levels (GTL), marketization (Mark), and intellectual property rights protection (IPRP) can mitigate the adverse effects of GPR. These results underscore the critical importance of political stability and robust internal mechanisms in promoting international technological exchanges. This study contributes to the literature on the intersection of political risks and technological advancement and provides actionable insights for policymakers to enhance resilience against geopolitical uncertainties, thereby fostering sustainable economic development.

Migration Preferences Under Economic and Geopolitical Uncertainty: An Asymmetric Approach

Abstract This paper aims at assessing asymmetric dynamics among migration preferences and various security and economic factors, focusing on the movements from Syria to Turkey and then to the EU via the Greek sea borders (2010M1−2022M12). We perform an economic analysis by developing a utility model, according to which migration preferences depend on security and employment and empirically test asymmetric responses of migration to corresponding shocks. We contribute to the literature by finding that migration is downwards sticky. Despite that theories of international relations may not be monolithic, the magnitude of security impact on migration implies that the state remains the primary actor responsible for managing this phenomenon, which brings us closer to neo-realism theory of International Relations (IR). Our findings reveal the factors that lead to the downwards stickiness of migration thus contributing to a better understating of the incentives for migration and to the formulation of more efficient policies.

Spillover effect of the geopolitical uncertainty on the cryptocurrency market

PurposeThis study aims to examine the influence of geopolitical uncertainty on cryptocurrency markets (CM).Design/methodology/approachUtilizing two distinct sets of daily returns data spanning from January 1, 2019, to May 4, 2023, the analysis employs the geopolitical risk (GPR) index formulated by Caldara and Iacoviello (2022), which encapsulates two pivotal events: the COVID-19 pandemic and the Russia–Ukraine conflict. The cryptocurrency market (CM) encompasses Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Dogecoin (DOGE). Employing the DCC-GARCH model and supplementing it with wavelet coherence analysis to discern perceptual distinctions between short- and long-term market reactions.FindingsThe main findings indicate that the GPR index clearly impacts the return of CM in the short-, mid- and long-term periods. BTC exhibited the highest volatility in response to changes in the GPR index. The cryptocurrency market offers a better diversification opportunity, and the impact of geopolitical events varies across time, with their direction and magnitude closely related to the specificity of the CM.Practical implicationsThis research is helpful for financial market investors, portfolio and risk managers, make informed decisions about including cryptocurrencies in their investment portfolios to mitigate the risks in uncertainty period.Originality/valueCryptocurrency market volatility is treated weakly during the risk period. With advanced statistical method, this study links two important events: the COVID-19 pandemic and the Russia–Ukraine conflict and selects the top four cryptocurrencies constituting 80% of the market. This study examines the impact of geopolitical risk on the cryptocurrency market and shows that this market is considered a safe haven.