A Gravity Model of Geopolitics and Financial Fragmentation

A Gravity Model of Geopolitics and Financial Fragmentation
READ MORE...
Volume/Issue: Volume 2024 Issue 196
Publication date: September 2024
ISBN: 9798400280337
$20.00
Add to Cart by clicking price of the language and format you'd like to purchase
Available Languages and Formats
paperback else
pdf else
epub else
English
Prices in red indicate formats that are not yet available but are forthcoming.
Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Exports and Imports , Globalization , geopolitics , geoeconomics , fragmentation , portfolioflows , cross-border , asset allocation , investment funds , gravitymodel , international finance , , investment diversion effect , geopolitical distance , recipient country , recipient-country time , country pair , Mutual funds , Estimation techniques , Plurilateral trade , Bonds , Global , Middle East

Summary

Do geopolitical tensions between countries influence the cross-border asset allocation of investment funds? Our answer is yes. We estimate gravity models and find that investment funds allocate smaller shares of their portfolios to recipient countries that are geopolitically more distant to their country of origin—with geopolitical distance measured by dissimilarity in countries’ voting behavior in the United Nations General Assembly. We also find an investment diversion effect: a recipient country attracts additional investments when its source countries get geopolitically more distant to third-party countries. These results are robust to instrumenting geopolitical distance and using alternative distance measures.