How important are global geopolitical risks to emerging countries?

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...

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Bibliographic Details
Published in:International economics (Paris) 2018-12, Vol.156, p.305-325
Main Authors: Cheng, Chak Hung Jack, Chiu, Ching-Wai (Jeremy)
Format: Article
Language:English
Subjects:
Business cycles
Emerging countries
Global geopolitical risks
Structural VAR
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Summary: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.
ISSN:2110-7017
DOI:10.1016/j.inteco.2018.05.002