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Effects of geopolitical risks on trade flows: evidence from the gravity model

Author

Listed:
  • Rangan Gupta

    (University of Pretoria)

  • Giray Gozgor

    (Istanbul Medeniyet University)

  • Huseyin Kaya

    (Istanbul Medeniyet University)

  • Ender Demir

    (Istanbul Medeniyet University)

Abstract

Using a classical gravity model, this paper examines the effects of geopolitical risks on the trade flows, among 164 developing and developed countries, for the period of 1985–2013. For this purpose, we use the new index of geopolitical risks (GPR index). To the best of our knowledge, this is the first paper in the literature that considers the new GPR index in a gravity model. The paper implements the fixed-effects (FE), the random-effects (RE), the Hausman–Taylor (HT), and the Poisson Pseudo-maximum Likelihood estimations. The findings indicate that geopolitical risks negatively affect the trade flows. The paper also discusses the potential policy implications.

Suggested Citation

  • Rangan Gupta & Giray Gozgor & Huseyin Kaya & Ender Demir, 2019. "Effects of geopolitical risks on trade flows: evidence from the gravity model," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 9(4), pages 515-530, December.
    • Handle: RePEc:spr:eurase:v:9:y:2019:i:4:d:10.1007_s40822-018-0118-0
    DOI: 10.1007/s40822-018-0118-0
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    More about this item

    Keywords

    Geopolitical risks; Trade flows; International trade; Gravity model; Emerging economies; Panel data estimation techniques;
    All these keywords.

    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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