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The Relationship Between Geopolitical Risk and Foreign Direct Investments and Financial Development: Kónya Panel Causality Analysis (Jeopolitik Risk ile Doğrudan Yabancı Yatırımlar ve Finansal Gelişmişlik Arasındaki İlişki: Kónya Panel Nedensellik Analizi)

Author

Listed:
  • Ceyhan, Turgay

    (Burdur Mehmet Akif Ersoy University)

  • Gulcan, Nazligul

    (Burdur Mehmet Akif Ersoy University)

Abstract

Geopolitical developments have significant effects on the economic and financial indicators of the countries due to the fact that the economies of the countries are open to external shocks. Rising geopolitical risks increase political and economic uncertainties and cause significant fluctuations in financial investments and capital movements. In this context, in this study, the effect of geopolitical risk on foreign direct investments and financial development was investigated. The 1985-2020 annual data of Canada, France, Germany, Italy, Japan, Russia, the United States, and the United Kingdom (G8 countries) were analyzed with the Kónya (2006) panel causality test. As a result of the analysis, it was found that there is a causality from geopolitical risk to foreign direct investments and financial development. In the case of countries, geopolitical risks in Canada, France, Germany, Russia and the United Kingdom are the Granger cause of foreign direct investment; geopolitical risks in Japan, Russia, the United States and the United Kingdom were determined to be the Granger cause of financial development.

Suggested Citation

  • Ceyhan, Turgay & Gulcan, Nazligul, 2022. "The Relationship Between Geopolitical Risk and Foreign Direct Investments and Financial Development: Kónya Panel Causality Analysis (Jeopolitik Risk ile Doğrudan Yabancı Yatırımlar ve Finansal Gelişmi," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 13(4), pages 625-637, October.
    • Handle: RePEc:ris:buecrj:0615
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    More about this item

    Keywords

    Geopolitical Risk; Foreign Direct Investments; Financial Development; Cross-Section Dependence; Panel Causality;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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