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How Firms’ Perceptions of Geopolitical Risk Affect Investment

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Abstract

Geopolitical risk has intensified in recent years, driven by events such as Russia’s invasion of Ukraine, escalating tensions between the United States and China, and conflicts in the Middle East. But how risky is the geopolitical landscape according to US firms? This brief presents a new index based on earnings call transcripts that reflects US firms’ perceptions of geopolitical risk and examines how those assessments affect their future investment, that is, their spending on long-term assets such as facilities, equipment, and technology.

Suggested Citation

  • Leslie Sheng Shen, 2025. "How Firms’ Perceptions of Geopolitical Risk Affect Investment," Current Policy Perspectives 25-3, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbcq:99551
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    More about this item

    Keywords

    geopolitical risk; firm investment; cash position;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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