What question did this study set out to answer?

Investigate the dynamic relationship between geopolitical uncertainty, macroeconomic stability, and foreign direct investment inflows across four structurally distinct economies between 2000 and 2024.

August 14, 2026Open Access

The Impact of Geopolitical Risk and Economic Stability on Foreign Direct Investment: A Dynamic Panel Analysis of the United States, China, India, and Türkiye

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Authors

MKMahmoud Firas Mahmoud KhalilIstanbul Commerce University HEHicabi ErsoyIstanbul Commerce University

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Implication

Dynamic panel analysis reveals an asymmetric negative elasticity of foreign direct investment to geopolitical shocks across four major economies, highlighting the buffering role of domestic...

Key Points

Investigate the dynamic relationship between geopolitical uncertainty, macroeconomic stability, and foreign direct investment inflows across four structurally distinct economies between 2000 and 2024.
Analyzed longitudinal panel data from 2000 to 2024 across the United States, China, India, and Türkiye.
Integrated the Caldara and Iacoviello Geopolitical Risk Index with macroeconomic datasets from the World Bank and International Monetary Fund.
Applied dynamic panel econometric models using the two-step system generalized method of moments (System GMM) and one-way fixed effects estimators to control for endogeneity and Nickell bias.
Geopolitical risk shocks exhibited a statistically significant negative elasticity with respect to foreign direct investment inflows.
The deterrent effect of geopolitical instability was asymmetric, with robust domestic economic resilience, disciplined monetary policy, and strong institutional governance mitigating capital outflows.
Geopolitical fragmentation induced cross-border capital reallocation rather than mere capital destruction, driving supply chain diversification strategies like 'China Plus One' toward India while compounding macroeconomic vulnerability in Türkiye.

Cite This Study

Khalil et al. (2026) studied this question.

synapsesocial.com/papers/6a7ec775b70b84ec8b913dbd https://doi.org/10.5281/zenodo.21909728

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Implication

Dynamic panel analysis reveals an asymmetric negative elasticity of foreign direct investment to geopolitical shocks across four major economies, highlighting the buffering role of domestic...

The Impact of Geopolitical Risk and Economic Stability on Foreign Direct Investment: A Dynamic Panel Analysis of the United States, China, India, and Türkiye

Discussion

Member takes

Implication

Key Points

Cite This Study

The Impact of Geopolitical Risk and Economic Stability on Foreign Direct Investment: A Dynamic Panel Analysis of the United States, China, India, and Türkiye

Discussion

Member takes

Implication

Key Points

Cite This Study

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