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The Influence of Geopolitical Risk on FDI in G20 Economies

Author

Listed:
  • Jamsheed Rizwan Akhtar

    (Central University)

  • Mingxing Cao

    (Central University)

  • Hussain Wazir Arif

    (Nazarbayev University)

  • Hussain Ahmed

    (Nazarbayev University)

Abstract

This study investigates the effect of Geopolitical risk (GPR) on FDI inflows and outflows in G20 countries from 2002 to 2022. This study employs the PVAR model to analyze the empirical results. The results show that past FDI inflows affect current FDI decisions. Geopolitical risk has a smaller statistical effect on FDI inflows but a larger effect on FDI outflows. The Granger causality test shows that the GPR causes FDI, but FDI does not cause GPR directly. When we demean FDI and risk data, robustness checks confirm the persistence of FDI patterns and the autoregressive nature of risk. The study shows that policymakers need to pay more attention to strengthening economic fundamentals rather than simply focusing on the ability to fend off geopolitical risk. Future research should further assess the characteristics of sector-specific impacts and thoroughly investigate how geopolitical uncertainty impacts investment trends.

Suggested Citation

  • Jamsheed Rizwan Akhtar & Mingxing Cao & Hussain Wazir Arif & Hussain Ahmed, 2026. "The Influence of Geopolitical Risk on FDI in G20 Economies," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 41(2), pages 107-132, June.
    • Handle: RePEc:ris:integr:022610
    DOI: 10.11130/jei.2025023
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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other

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