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​​How Does Geopolitics Influence Trade and Investment among Member Countries of the Regional Comprehensive Economic Partnership?

Author

Listed:
  • Hazel C. Parcon-Santos

    (Bangko Sentral ng Pilipinas)

  • Jose Adlai M. Tancangco

    (Bangko Sentral ng Pilipinas)

Abstract

This study examines the impact of geopolitical differences on trade and investment among members of an economically cooperative trading bloc. Using bilateral trade and investment data from 2010 to 2023 and applying an augmented gravity model, the analysis finds that heightened geopolitical tensions reduce goods trade and cross-border investments within the Regional Comprehensive Economic Partnership. However, the effects are asymmetric— trade is more resilient to geopolitical frictions than investments, particularly portfolio investments, which are more sensitive than direct investments. The research highlights that even within a cooperative bloc, geopolitical tensions can significantly disrupt economic activity. This finding underscores the importance of proactively managing geopolitical risks to safeguard regional integration and economic stability.

Suggested Citation

  • Hazel C. Parcon-Santos & Jose Adlai M. Tancangco, 2025. "​​How Does Geopolitics Influence Trade and Investment among Member Countries of the Regional Comprehensive Economic Partnership?," BSP Discussion Paper Series 202512, Bangko Sentral ng Pilipinas.
    • Handle: RePEc:bhd:dpaper:202512
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    File URL: https://www.bsp.gov.ph/Sites/researchsite/Publications/BSP-Discussion-Papers/DP202512.pdf
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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

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