Geopolitical risk and the dynamics of international capital flows

Feng, Chao-Nan; Han, Liyan; Vigne, Samuel A.; Xu, Yang

doi:10.1016/j.intfin.2022.101693

Cited by 51 publications

(15 citation statements)

References 48 publications

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“…Alam et al (2023) state that geopolitical events act as external shocks by raising economic and political uncertainty and resulting in subpar firm investment. Feng et al (2023) demonstrate that the increase in geopolitical risk leads to the contraction of capital flows for 45 major economies. Based on the above literature, geopolitical risk affects economic conditions and leads to fluctuations in business cycles.…”

Section: Introductionmentioning

confidence: 93%

Does Geopolitical Risk Matter for Sovereign Credit Risk? Fresh Evidence from Nonlinear Analysis

Naifar

Aljarba

2023

JRFM

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The recent geopolitical uncertainty and the alarming increase in the sovereign credit risk of many countries have motivated us to investigate the potential asymmetric co-movement between geopolitical risk and sovereign credit risk for nineteen countries (China, Russia, USA, Brazil, UK, South Korea, Mexico, Saudi Arabia, Turkey, Sweden, Spain, Norway, Italy, Morocco, France, Bahrain, Abu Dhabi, Japan, and Greece). Using data consisting of Sovereign Credit Default Swap (SCDS), Geopolitical Risk (GPR), and the Quantile-on-Quantile approach (QQA), empirical findings indicate that (i) the effects of GPR on SCDS were heterogeneous, mainly positive, asymmetric, and varied across quantiles and countries; (ii) when the SCDS and GPR are both in upper quantiles, the impacts of GPR are more pronounced; (iii) the countries with the most significant sovereign wealth funds (Norway, China, Saudi Arabia) are less affected by geopolitical uncertainty.

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Section: Introductionmentioning

confidence: 93%

Does Geopolitical Risk Matter for Sovereign Credit Risk? Fresh Evidence from Nonlinear Analysis

Naifar

Aljarba

2023

JRFM

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“…Bossman et al [ 29 ] confirmed that the Russia-Ukraine conflict significantly influences major currencies, particularly at low and high extremes. Feng et al [ 30 ] examined the influence of geopolitical risk on capital flows and explored that capital flows in advanced and emerging nations face considerable reductions when geopolitical risk rises.…”

Section: Literature Reviewmentioning

confidence: 99%

Conflict and exchange rate valuation: Evidence from the Russia-Ukraine conflict

Khan

Cao

2023

Heliyon

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“…Wu and Shao (2023) identify that being a source of capital flight, China’s outward foreign direct investment is promoted by the country’s economic policy uncertainty while the host country’s monetary policy uncertainty inhibits China’s foreign direct investment. Feng et al (2023) found the evidence of flight home effect as they identified that increased geopolitical risk at the aggregate level shrinks capital flows both for advanced and emerging economies. Specifically, emerging economies respond to geopolitical risk with a greater magnitude of variations in capital flows.…”

Section: Introductionmentioning

confidence: 99%

Does capital flight tone down economic growth? Evidence from emerging Asia

Basher,

Mamun,

Bal

et al. 2023

JFEP

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Purpose This study aims to offer an up-to-date estimate of capital flight from selected emerging Asian economies and examine the anti-growth phenomenon of capital flight by using annual data for the period 1981–2019. Design/methodology/approach The study relies on residual methods to derive the estimate of capital flight with necessary adjustments. It then applies the autoregressive distributed lag Bounds testing approach in examining the impact of capital flight on the economic growth of Asian emerging economies. Findings The study identifies capital flight as the attributor to the slower economic growth of the selected emerging economies of Asia. Practical implications Apart from appropriate policies addressing the issues causing capital flight, unleashing the way of private sector-led growth of the emerging countries with necessary policy, infrastructural, institutional and regulatory support can rather help them retain and repatriate domestic capital. Originality/value The capital flight estimates in earlier studies are antithetical as they differ in terms of definition and estimation procedure. Again, the growth effect of capital flight in these economies has received meager attention in research and policy debates. Furthermore, being country-specific or region-specific, existing studies are unable to compare the growth effect of capital flight for different emerging economies in this region. Examining the growth effects for a large number of countries separately based on a common estimate of capital flight can resolve these issues that this study aims to do.

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Geopolitical risk and the dynamics of international capital flows

Cited by 51 publications

References 48 publications

Does Geopolitical Risk Matter for Sovereign Credit Risk? Fresh Evidence from Nonlinear Analysis

Does Geopolitical Risk Matter for Sovereign Credit Risk? Fresh Evidence from Nonlinear Analysis

Conflict and exchange rate valuation: Evidence from the Russia-Ukraine conflict

Does capital flight tone down economic growth? Evidence from emerging Asia

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