IDEAS home Printed from https://ideas.repec.org/a/eee/pacfin/v95y2026ics0927538x25003221.html

Geopolitical risk, capital flow volatility, and asset market spillovers

Author

Listed:
  • Beirne, John
  • Renzhi, Nuobu

Abstract

Geopolitical shocks are found to heighten financial uncertainty and disrupt cross-border capital movements, with the magnitude of these effects depending on domestic structural characteristics. This paper examines the effects of country-specific geopolitical risk on capital flow volatility and asset markets across 29 emerging and advanced economies over the period 2000–2023. Using panel regressions and a panel structural VAR framework, the results show that geopolitical risk raises bond yields and leads to exchange rate depreciation, with stronger and more persistent effects in emerging economies. Asset markets for advanced economies are affected mainly through lower equity prices. The impact on capital flow volatility is slightly higher on average for advanced economies but remains more persistent for emerging economies. Greater financial development, higher central bank independence, and lower public debt mitigate the adverse effects of geopolitical risk on both capital flows and asset markets. These findings highlight the importance of strong macroeconomic fundamentals and institutional frameworks in building resilience against geopolitical shocks.

Suggested Citation

  • Beirne, John & Renzhi, Nuobu, 2026. "Geopolitical risk, capital flow volatility, and asset market spillovers," Pacific-Basin Finance Journal, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:pacfin:v:95:y:2026:i:c:s0927538x25003221
    DOI: 10.1016/j.pacfin.2025.102985
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927538X25003221
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.pacfin.2025.102985?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:pacfin:v:95:y:2026:i:c:s0927538x25003221. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/pacfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.