Impact of Geopolitical Risk on International Trade: Evidence from Container Throughputs

Abstract

It is of great importance for manufacturers and consumers that raw materials and products can be delivered on time without any disruption in the supply chain. The fact that production chains can be located in more than one country in the globalized world makes the smooth operation of the supply chain partially difficult. For this reason, especially suppliers may stop doing business with countries where geopolitical risk is high, and this may change the container traffic of countries. Therefore, this study empirically tests whether geopolitical risks change the container volumes of countries. Our sample includes 15 of the 19 countries in the world for which the geopolitical risk index is calculated because some values of the excluded countries are missing. The countries included are Argentina, Brazil, China, Colombia, India, Indonesia, Korea, Malaysia, Mexico, Philippines, Russia, Saudi Arabia, South Africa, Thailand, and Türkiye in alphabetical order. The period covered consists of 21 observations annually, covering the years between 2000 and 2020. The asymmetric causality test method was applied to consider the possible asymmetrical consequences of the geopolitical risk on the container trade in the countries. The panel causality test results obtained show that positive shocks in geopolitical risk cause negative shocks in container traffic. These results show that the security and stability of the countries around them are critical for the country's economy, as well as the security and stability of the countries themselves. Countries that want to grow commercially should develop their policies by considering regional security and stability.