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Geopolitical Instability and its Ripple Effects on Service Trade

Author

Listed:
  • Nair Amal

    (Symbiosis School of Economics)

  • Tripathi Sabyasachi

    (Symbiosis School of Economics)

Abstract

Geopolitical risks have increasingly hindered global trade by disrupting supply chains, raising transaction costs, and creating uncertainty for businesses. The present paper examines the worldwide pattern of global disputes and risk measured by the geopolitical risk index and its significance on the trade of services. Additionally, it assesses how the regulatory system helps in mitigating the impacts of such threats. The Pseudo-Poisson Maximum Likelihood (PPML) regression models are used to assess the adverse impact of geopolitical risks on international service trade using a panel dataset comprising 44 countries from 2011 to 2023. Overall, the study finds a negative effect of geopolitical factors on total service trade and that an effective regulatory system can reduce the negative impact of such geopolitical disruption. Disaggregated level trade analysis suggests that geopolitical risk increases government service imports and exports. The results assist policymakers in gauging the economic cost of geopolitical risk and designing policies to neutralize its disruptive potential.

Suggested Citation

  • Nair Amal & Tripathi Sabyasachi, 2026. "Geopolitical Instability and its Ripple Effects on Service Trade," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 41(1), pages 41-69, March.
    • Handle: RePEc:ris:integr:022348
    DOI: 10.11130/jei.2025018
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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