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The influence of geopolitical risk on CBDC adoption and uncertainty: wavelet coherence analysis

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  • Umar, Muhammad
  • Luo, Hang

Abstract

This study provides empirical evidence on the relationship between geopolitical risk (GPR) and central bank digital currency (CBDC) adoption and uncertainty. Using the wavelet coherence technique, the results reveal a strong association between GPR and both the CBDC adoption index and the CBDC uncertainty index, particularly during the period from May 2021 (Israel-Palestine crisis) to March 2023 (intensified Russia-Ukraine conflict). Throughout this interval, the series predominantly exhibit in-phase movements, indicating a positive relationship; specifically, geopolitical tensions following U.S. sanctions on Russia coincided with an increase in CBDC adoption. To provide deeper insights, the study further examines the relationship between U.S. and Russian geopolitical risks and the CBDC adoption and uncertainty indices separately. The findings show that Russian geopolitical risk has a comparatively stronger association with both indices than U.S. geopolitical risk. Overall, the results suggest that heightened geopolitical risk weakens confidence in the existing global financial system and motivates countries to pursue CBDC initiatives, potentially contributing to the emergence of an alternative framework for international transactions.

Suggested Citation

  • Umar, Muhammad & Luo, Hang, 2026. "The influence of geopolitical risk on CBDC adoption and uncertainty: wavelet coherence analysis," The North American Journal of Economics and Finance, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:ecofin:v:85:y:2026:i:c:s1062940826000951
    DOI: 10.1016/j.najef.2026.102673
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    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Systems; Standards; Regimes; Government and the Monetary System
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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