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Unpacking the interplay between geopolitical factors and financial development: Evidence from cross-panels

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  • Ahsan, Muhammad
  • Haris, Muhammad
  • Al-Faryan, Mamdouh Abdulaziz Saleh

Abstract

It has been observed that in recent years, geopolitical factors have gained much importance as determinants of financial development. Therefore, this study decomposes geopolitical factors into geopolitical risk, threats, and acts to examine their influence on financial development in 42 countries from 1985 to 2021. The findings are robust to multiple econometric methodologies and a number of control variables. Using a comprehensive panel-data framework, the study employs Pooled OLS, OLS fixed-effects, Generalized Method of Moments (GMM), Least Squares Dummy Variable (LSDV), and Quantile regressions to ensure consistency and reliability of the findings. To further enhance the depth of analysis, the full sample is divided into three sub-panels, i.e., economy-wise, income-wise, and region-wise. The study reports that geopolitical risk, threats, and acts significantly reduce financial development. Interestingly, when we divided our sample into cross-panels, the study reported different results. The findings of this study will help financial policymakers design effective strategies for dealing with geopolitical factors.

Suggested Citation

  • Ahsan, Muhammad & Haris, Muhammad & Al-Faryan, Mamdouh Abdulaziz Saleh, 2026. "Unpacking the interplay between geopolitical factors and financial development: Evidence from cross-panels," Research in International Business and Finance, Elsevier, vol. 86(C).
    • Handle: RePEc:eee:riibaf:v:86:y:2026:i:c:s0275531926000929
    DOI: 10.1016/j.ribaf.2026.103365
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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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