Effects of Geopolitical Risks on Countries’ Trade Flows: A Nonlinear ARDL Analysis

Year 2023, Volume: 23 Issue: 3, 519 - 530, 24.07.2023

Oğuzhan Özçelik

https://doi.org/10.21121/eab.1065493

Abstract

In this study, the effects of geopolitical risks (GPR) on countries’ trade flows are examined with the nonlinear ARDL method by using the data of 11 countries for 1993M01 – 2021M08 periods. According to the findings, positive GPR shocks reduced exports in Turkey, Russia, China, South Africa, Argentina, and Israel, whereas they reduced imports in Turkey, Russia, South Africa, and Israel. Negative GPR shocks increased exports in Russia, China, South Africa, Argentina, and Israel, whereas they increased imports in Mexico, China, and Argentina. It was determined that the effects of GPR on exports are symmetrical in Turkey, Russia, South Africa, Argentina, and Israel, whereas they are asymmetrical in Mexico, South Korea, India, Brazil, China, and Indonesia. Moreover, we find that the effects of geopolitical risks on imports are symmetrical in all countries. Increases in the REER decreased exports in Turkey, Mexico, India, China, Indonesia, South Africa, Argentina, and Israel, whereas they increased imports in Turkey, South Korea, Russia, Brazil, and Indonesia and decreased imports in Argentina and Israel. Increases in the world income increased exports of all countries, whereas increases in the countries’ own national income increased imports in Turkey, Mexico, South Korea, Russia, India, Brazil, Argentina, and Israel.

Keywords

Geopolitical risk index, trade flows, nonlinear ARDL, symmetric and asymmetric effects., Geopolitical risk index, trade flows, nonlinear ARDL, symmetric and asymmetric effects.

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