The Relationship Between Geopolitical Risk and Foreign Direct Investments and Financial Development: Kónya Panel Causality Analysis (Jeopolitik Risk ile Doğrudan Yabancı Yatırımlar ve Finansal Gelişmişlik Arasındaki İlişki: Kónya Panel Nedensellik Analizi)

Turgay Ceyhan and Nazligul Gulcan
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Turgay Ceyhan: Burdur Mehmet Akif Ersoy University
Nazligul Gulcan: Burdur Mehmet Akif Ersoy University

Business and Economics Research Journal, 2022, vol. 13, issue 4, 625-637

Abstract: Geopolitical developments have significant effects on the economic and financial indicators of the countries due to the fact that the economies of the countries are open to external shocks. Rising geopolitical risks increase political and economic uncertainties and cause significant fluctuations in financial investments and capital movements. In this context, in this study, the effect of geopolitical risk on foreign direct investments and financial development was investigated. The 1985-2020 annual data of Canada, France, Germany, Italy, Japan, Russia, the United States, and the United Kingdom (G8 countries) were analyzed with the Kónya (2006) panel causality test. As a result of the analysis, it was found that there is a causality from geopolitical risk to foreign direct investments and financial development. In the case of countries, geopolitical risks in Canada, France, Germany, Russia and the United Kingdom are the Granger cause of foreign direct investment; geopolitical risks in Japan, Russia, the United States and the United Kingdom were determined to be the Granger cause of financial development.

Keywords: Geopolitical Risk; Foreign Direct Investments; Financial Development; Cross-Section Dependence; Panel Causality (search for similar items in EconPapers)
JEL-codes: C23 F21 G32 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ris:buecrj:0615

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