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The test of financial resilience in emerging market economies: Dual shocks from geopolitical risks and global liquidity tightening

Author

Listed:
  • Li, Zhenglun
  • Zhao, Pei
  • Ma, Chen
  • Wang, Qiang

Abstract

This paper aims to examine the impact of geopolitical risk and global liquidity tightening on the financial resilience of emerging market economies. Utilizing annual data from 25 emerging market economies during the period 2001 to 2023, the study tests the relevant hypotheses through regression analysis. The empirical results indicate that geopolitical risk has a significant negative effect on financial resilience. Additionally, global liquidity tightening serves as a moderating factor between geopolitical risk and financial resilience. Further heterogeneity analysis reveals that the impact of geopolitical risk on financial resilience varies across countries with different levels of gross national income (GNI) per capita and foreign direct investment (FDI). Specifically, the effect of geopolitical risk on financial resilience is more pronounced in countries with low per capita GNI and high levels of FDI.

Suggested Citation

  • Li, Zhenglun & Zhao, Pei & Ma, Chen & Wang, Qiang, 2026. "The test of financial resilience in emerging market economies: Dual shocks from geopolitical risks and global liquidity tightening," Finance Research Letters, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:finlet:v:88:y:2026:i:c:s1544612325024882
    DOI: 10.1016/j.frl.2025.109239
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    References listed on IDEAS

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