Geopolitical risk spillover among nations: evidence from Russia

Many scholars have empirically tested the influence of geopolitical risk on economic activities and financial indicators. This paper attracts a new research strand by investigating the geopolitical risk determinants. More precisely, we examine if the international geopolitical risk of a selected group of countries spills over to Russia. Alternatively, it inspects if the geopolitical tension among nations is cointegrated. This group of countries includes the United States, Germany, China, and Ukraine. The current paper designed and computed an empirical model using the Autoregressive Distributed Lag model (ARDL) during the period 1993:01-2022:05. The results reveal that the international geopolitical risk of Russia is cointegrated with the other four nations. In the short run, the international geopolitical risk of the four nations spills over to Russia by increasing its international geopolitical risk. While in the long run, the same impacts persist. But the effect of the United States' geopolitical risk becomes statistically insignificant. The results also show that Germany has the largest effect on Russia's geopolitical risk in the long run. Moreover, the increase in oil prices overflows Russia by decreasing its international geopolitical risk. Thus, rival nations should reach a settlement to reduce the geopolitical tension. Otherwise, the world economic performance will deteriorate.