The Relationship Between Geopolitical Risk and Foreign Direct Investments and Financial Development: Kónya Panel Causality Analysis

Article Information
Journal: Business and Economics Research Journal
Title of Article: The Relationship Between Geopolitical Risk and Foreign Direct Investments and Financial Development: Kónya Panel Causality Analysis
Author(s): Turgay Ceyhan, Nazlıgul Gulcan
Volume: 13
Number: 4
Year: 2022
Page: 625-637
ISSN: 2619-9491
DOI Number: 10.20409/berj.2022.393
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

JEL Classification: G32, F21, C23

https://www.berjournal.com/wp-content/plugins/downloads-manager/img/icons/pdf.gif Full Text ( 1119)

Loading