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Impact of Geopolitical Risk on Foreign Direct Investment: Evidence from OECD Countries

Lin, Yili LU and Mei, Yucong LU (2025) NEKN02 20251
Department of Economics
Abstract
Nowadays, the complex global political and economic situation have made geopolitical risks increasingly prominent, this has become a driving force for studying the impact of geopolitics on the economy. With the development of the global economy, international economic and trade cooperation organizations such as the OECD play an important role in the global integrated economy, focusing on OECD countries has great significance.
This thesis investigates the impact of geopolitical risk (GPR) on foreign direct investment (FDI) net inflows in OECD countries. It is conducted from both theoretical and empirical perspectives. At the theoretical support level, this thesis refers to existing literature research on GPR, FDI, and investment in OECD... (More)
Nowadays, the complex global political and economic situation have made geopolitical risks increasingly prominent, this has become a driving force for studying the impact of geopolitics on the economy. With the development of the global economy, international economic and trade cooperation organizations such as the OECD play an important role in the global integrated economy, focusing on OECD countries has great significance.
This thesis investigates the impact of geopolitical risk (GPR) on foreign direct investment (FDI) net inflows in OECD countries. It is conducted from both theoretical and empirical perspectives. At the theoretical support level, this thesis refers to existing literature research on GPR, FDI, and investment in OECD member countries, laying the foundation for the theoretical argument of this thesis. At the empirical analysis, this study uses the data of 25 OECD countries covering the period from 1995 to 2023 and two-way fixed effects model as baseline model to investigate the impact of GPR on FDI net inflows. Empirical result indicates that the GPR has significant negative effect on FDI net inflows in OECD countries. Meanwhile, the heterogeneity analysis reveals the difference of the effect between European and non-European countries. Furthermore, it analyzes the reasons of the difference by adding the shock of Russia-Ukraine Conflict and finds that conflict can enhance negative effect in European countries. Also, it finds that the increase of GDP per capita can reduce negative effect. Finally, various robustness tests are conducted to ensure the robustness and reliability of the results and conclusions. (Less)
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author
Lin, Yili LU and Mei, Yucong LU
supervisor
organization
course
NEKN02 20251
year
type
H1 - Master's Degree (One Year)
subject
keywords
Geopolitical Risk, Foreign Direct Investment, OECD
language
English
id
9193510
date added to LUP
2025-09-12 10:42:40
date last changed
2025-09-12 10:42:40
@misc{9193510,
  abstract     = {{Nowadays, the complex global political and economic situation have made geopolitical risks increasingly prominent, this has become a driving force for studying the impact of geopolitics on the economy. With the development of the global economy, international economic and trade cooperation organizations such as the OECD play an important role in the global integrated economy, focusing on OECD countries has great significance.
This thesis investigates the impact of geopolitical risk (GPR) on foreign direct investment (FDI) net inflows in OECD countries. It is conducted from both theoretical and empirical perspectives. At the theoretical support level, this thesis refers to existing literature research on GPR, FDI, and investment in OECD member countries, laying the foundation for the theoretical argument of this thesis. At the empirical analysis, this study uses the data of 25 OECD countries covering the period from 1995 to 2023 and two-way fixed effects model as baseline model to investigate the impact of GPR on FDI net inflows. Empirical result indicates that the GPR has significant negative effect on FDI net inflows in OECD countries. Meanwhile, the heterogeneity analysis reveals the difference of the effect between European and non-European countries. Furthermore, it analyzes the reasons of the difference by adding the shock of Russia-Ukraine Conflict and finds that conflict can enhance negative effect in European countries. Also, it finds that the increase of GDP per capita can reduce negative effect. Finally, various robustness tests are conducted to ensure the robustness and reliability of the results and conclusions.}},
  author       = {{Lin, Yili and Mei, Yucong}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Impact of Geopolitical Risk on Foreign Direct Investment: Evidence from OECD Countries}},
  year         = {{2025}},
}