The Influence of Geopolitical Risk on FDI in G20 Economies

Jamsheed Rizwan Akhtar, Mingxing Cao, Hussain Wazir Arif and Hussain Ahmed
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Jamsheed Rizwan Akhtar: Central University
Mingxing Cao: Central University
Hussain Wazir Arif: Nazarbayev University
Hussain Ahmed: Nazarbayev University

Journal of Economic Integration, 2026, vol. 41, issue 2, 301-326

Abstract: This study investigates the effect of Geopolitical risk (GPR) on FDI inflows and outflows in G20 countries from 2002 to 2022. This study employs the PVAR model to analyze the empirical results. The results show that past FDI inflows affect current FDI decisions. Geopolitical risk has a smaller statistical effect on FDI inflows but a larger effect on FDI outflows. The Granger causality test shows that the GPR causes FDI, but FDI does not cause GPR directly. When we demean FDI and risk data, robustness checks confirm the persistence of FDI patterns and the autoregressive nature of risk. The study shows that policymakers need to pay more attention to strengthening economic fundamentals rather than simply focusing on the ability to fend off geopolitical risk. Future research should further assess the characteristics of sector-specific impacts and thoroughly investigate how geopolitical uncertainty impacts investment trends.

Keywords: Geopolitical Risk; FDI Inflow; FDI Outflow; G20 Economies; Panel Vector Autoregressive Model (search for similar items in EconPapers)
JEL-codes: F21 F51 F59 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:022610

DOI: 10.11130/jei.2025023

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