Being an emerging economy: To what extent do geopolitical risks hamper technology and FDI inflows?

Trang Thi Thuy Nguyen, Binh Thai Pham and Hector Sala

Economic Analysis and Policy, 2022, vol. 74, issue C, 728-746

Abstract: This paper evaluates the impact of geopolitical risk (GPR) on total factor productivity (TFP) and the inflows of foreign direct investment (FDI) for a group of 18 emerging economies between 1985 and 2019. Based on Granger causality panel data tests, we show that the trajectories of these variables cannot be neglected to explain one another. To account for cross-equation influence, we estimate seemingly unrelated regression (SUR) models and uncover a significant and robust negative impact of GPR on TFP and FDI. Counterfactual simulations provide a quantitative approximation of GPR’s impact in 2015–2019, which is substantial in terms of TFP growth but small in terms of FDI. For the emerging economies to consolidate their economic progress, geopolitical stability is essential.

Keywords: Geopolitical risk; TFP; FDI; Emerging economies (search for similar items in EconPapers)
JEL-codes: F21 F50 F68 O40 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:74:y:2022:i:c:p:728-746

DOI: 10.1016/j.eap.2022.04.005

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