GEOPOLITICAL RISK AND ITS EFFECTS ON FINANCIAL STABILITY: CASE STUDY OF THE REPUBLIC OF SERBIA

Vesna Martin

Ekonomske ideje i praksa, 2025, issue 59, 19-36

Abstract: One of the biggest threats facing the world today is geopolitical risk. Apart from climate change and the increasing use of digitalization, geopolitical risk is a major issue for nearly every nation in the world. It is reflected in global capital markets, disrupts supply chains, impacts credit ratings and trust in all financial system participants, delays innovation and investment, and influences how monetary and fiscal policy is implemented. The aim of this paper is to examine how geopolitical risk affects financial stability, specifically focusing on the Republic of Serbia. Due to its foreign policy stance between regional interests and larger nations, Serbia is impacted by geopolitical risk. To reduce adverse effects on the prospects for the country, managing these risks calls for internal reforms, strategic diplomacy, and the creation of long-term political and economic policies. This suggests that the strategic resolve to pursue EU accession negotiations, cooperation with East and West nations, and adjustment to economic issues (such as high inflation, the energy crisis, and complex supply chains) will persist. Because of the economy's resiliency during the pre-coronavirus era, the analysis demonstrated that geopolitical concerns did not pose a threat to the Republic of Serbia's financial stability. Basic macroeconomic indicators, external position indicators, and important macroprudential indicators all point to this.

Keywords: geopolitical risk; financial stability; financial stress; geopolitical risk index (search for similar items in EconPapers)
JEL-codes: F51 G20 G32 H56 (search for similar items in EconPapers)
Date: 2025
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