Geopolitical Instability and Its Ripple Effects On Service Trade

Nair Amal and Sabyasachi Tripathi

MPRA Paper from University Library of Munich, Germany

Abstract: Geopolitical risks affect global economies, particularly the services trade, which makes up 20% of total trade. Understanding these risks is key because they can impact inflation, GDP growth, the financial sector, and supply chains. The aim of the research is to examine the worldwide pattern of geopolitical risk and its significance on the trade of services, to measure how much global disputes and risk, as explained in the GPR Index, impact service trade, and to know how strong a regulatory system helps to mitigate the impacts of such threats. The Pseudo-Poisson Maximum Likelihood is used in the study to assess the adverse impact of geopolitical risks on international service trade using a panel dataset comprising 44 countries from 2011 to 2021. The study finds a negative effect of geopolitical factors on service trade and further finds that an effective regulatory system can reduce the negative impact of such geopolitical disruptions. The results may assist policymakers in gauging the economic cost of geopolitical risk and in designing policies to neutralise its disruptive potential.

Keywords: Geopolitical Risk; Service trade; PPML; Regulatory Quality (search for similar items in EconPapers)
JEL-codes: F1 F13 F63 (search for similar items in EconPapers)
Date: 2025-04-10
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:124670

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