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How important are global geopolitical risks to emerging countries?

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  • Cheng, Chak Hung Jack
  • Chiu, Ching-Wai (Jeremy)

Abstract

This paper shows that shocks to global geopolitical risk carry considerable business cycle implications for emerging economies. We estimate structural VAR models for 38 emerging countries and find evidence that these shocks are associated with significant economic contractions. The average share of output variation explained by global geopolitical risk shocks is between 13 and 22 percent. However, the individual share for each country varies vastly across our sample. The results remain robust when controlling for the terms of trade, global financial conditions, the US economic policy uncertainty and the US stock market volatility.

Suggested Citation

  • Cheng, Chak Hung Jack & Chiu, Ching-Wai (Jeremy), 2018. "How important are global geopolitical risks to emerging countries?," International Economics, Elsevier, vol. 156(C), pages 305-325.
    • Handle: RePEc:eee:inteco:v:156:y:2018:i:c:p:305-325
    DOI: 10.1016/j.inteco.2018.05.002
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    Keywords

    Global geopolitical risks; Emerging countries; Business cycles; Structural VAR;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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