Inflation cost of strategic goods export restriction: evidence from dynamic spatial panel data model

William W. Chow ()
Additional contact information
William W. Chow: Beijing Normal - Hong Kong Baptist University

International Economics and Economic Policy, 2025, vol. 22, issue 4, No 18, 25 pages

Abstract: Abstract This paper analyzes the inflation cost of geopolitical tension as manifested via trade in strategic goods. A nonlinear state space model containing spatial elements is specified for the task which has an added advantage of permitting endogenous spatial linkages with the latter being a proxy for geopolitical relationships. Estimation is performed using Particle MCMC methods. It is found that positive inflation spillover exists among five major world powers, and its presence would help propagate structural shocks to non-origin countries by up to 36% the size of the source disturbance. Two complementary but opposite effects underlie the magnitude of the inflation cost. The aggregate effect of strategic goods trade restriction turns out to be asymmetric and product- and country-pair dependent, with any involvement with China generating the highest costs. Eschewing antagonistic trade tactics conducted on massive scales may well be a way to improve economic well-being.

Keywords: Inflation spillover; Strategic goods; Geopolitics; State space model; Particle Gibbs; Ancestor sampling (search for similar items in EconPapers)
JEL-codes: C15 C31 C32 E31 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10368-025-00694-4 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:iecepo:v:22:y:2025:i:4:d:10.1007_s10368-025-00694-4

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10368/PS2

DOI: 10.1007/s10368-025-00694-4

Access Statistics for this article

International Economics and Economic Policy is currently edited by Paul J.J. Welfens, Holger C. Wolf, Christian Pierdzioch and Christian Richter

More articles in International Economics and Economic Policy from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().