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Bridge over troubled water? German foreign direct investment in times of geopolitical tensions

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  • Goldbach, Stefan
  • Nitsch, Volker

Abstract

Evidence of geoeconomic fragmentation does not necessarily apply to all types of cross-border business activities alike. For foreign direct investment, for instance, an increase in trade costs due to heightened geopolitical risk may actually make production abroad relatively more attractive. This paper examines the geographic pattern of German foreign direct investment over the period from 2002 to 2022. Using a variety of models and specifications, we find no consistent evidence that a host country’s geopolitical position has a measurable impact on German investment once traditional gravity factors are accounted for.

Suggested Citation

  • Goldbach, Stefan & Nitsch, Volker, 2026. "Bridge over troubled water? German foreign direct investment in times of geopolitical tensions," Economics Letters, Elsevier, vol. 263(C).
    • Handle: RePEc:eee:ecolet:v:263:y:2026:i:c:s016517652600090x
    DOI: 10.1016/j.econlet.2026.112896
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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General

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