Jamsheed, Rizwan Akh a
A icle
Assessing Policy- ela ed Risk and Expo Dynamics:
E idence om 16 Economies
Eas Asian Economic Re iew (EAER)
P o ided in Coope a ion wi h:
Ko ea Ins i u e o In e na ional Economic Policy (KIEP), Sejong-si
Sugges ed Ci a ion: Jamsheed, Rizwan Akh a (2024) : Assessing Policy- ela ed Risk and Expo
Dynamics: E idence om 16 Economies, Eas Asian Economic Re iew (EAER), ISSN 2508-1667, Ko ea
Ins i u e o In e na ional Economic Policy (KIEP), Sejong-si, Vol. 28, Iss. 4, pp. 421-457,
h ps://doi.o g/10.11644/KIEP.EAER.2024.28.4.441
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Eas Asian Economic Re iew ol. 28, no. 4 (Decembe 2024) 421-457
h ps://dx.doi.o g/10.11644/KIEP.EAER.2024.28.4.441
ⓒ Ko ea Ins i u e o In e na ional Economic Policy
Assessing Policy- ela ed Risk and Expo Dynamics:
E idence om 16 Economies*
Rizwan Akh a Jamsheed†
Cen al Uni e si y o Finance and Economics
[email p o ec ed]
1
This esea ch examines he impac o policy- ela ed isk (geopoli ical isk, economic
unce ain y, and poli ical isk) on expo pe o mance. The da a we used came om 16
leading economies be ween 1998 and 2022. We used ixed e ec , wo-s age leas
squa es (2SLS), and gene alized me hod o momen s (GMM) eg ession analyses o
see how di e en ypes o policy- ela ed isk a ec expo s. The esul s show ha
geopoli ical isk and economic policy unce ain y ha e a nega i e impac on expo
pe o mance, while poli ical s abili y has a posi i e e ec . We di ided he coun ies
in o Eas and Wes , de eloping and de eloped coun ies, and he esul s show di e en
e iciency bu he same impac on Eas and Wes . Howe e , he esul o de eloped
and de eloping coun ies has a a ia ion in he e ec o geopoli ical isk on expo s;
in de eloped coun ies, he geopoli ical isk has a nega i e insigni ican e ec , while
in de eloping coun ies, i has a signi ican ly nega i e impac . The s udy con ibu es
o he li e a u e by p o iding a egional pe spec i e on he in luence o policy- ela ed
isks on expo pe o mance, o e ing aluable insigh s o policymake s and i ms
seeking o na iga e he complexi ies o global ade amids unce ain y.
Keywo ds: Policy- ela ed Risk, Geopoli ical Risk, Economic Policy Unce ain y,
Poli ical Risk, Expo Pe o mance
JEL Classi ica ion: E60, F10, F14
* I wan o exp ess my since e g a i ude o P o esso Cao Mingxing and P o esso Yan Haosheng o
hei in aluable eedback and guidance h oughou my esea ch. Thei insigh s and sugges ions
ha e been c ucial in shaping he di ec ion and quali y o his wo k. I am also deeply hank ul o M .
Zain Ul Abideen o his in aluable ins uc ion on he me hodology, which g ea ly enhanced my
unde s anding and app oach o his esea ch.
† Ins i u e o Finance and Economic Resea ch, Cen al Uni e si y o Finance and Economics, Beijing,
China.
ID
422 Rizwan Akh a Jamsheed
ⓒ Ko ea Ins i u e o In e na ional Economic Policy
I. In oduc ion
Policy- ela ed isks, such as geopoli ical ensions, poli ical ins abili y, and economic
policy unce ain ies, signi ican ly shape global ade and economic dynamics. These
isks can s em om a ious sou ces, including a med con lic s, poli ical dispu es, and
sudden changes in go e nmen policies. The In e na ional Mone a y Fund (IMF,
2017)1 has unde sco ed he impo ance o hese isks, highligh ing ha hey pose
subs an ial h ea s o he global economic ou look. Fo ins ance, a med con lic s and
geopoli ical ensions o en lead o ade dis up ions and he imposi ion o sanc ions
(Glick and Taylo , 2010). Simila ly, geopoli ical conce ns ha e a di ec impac on
ade lows, as demons a ed by bo h heo e ical and empi ical e idence p esen ed in
he li e a u e (Glick and Taylo , 2010; IMF, 2017).
The pe asi e in luence o geopoli ical isk on ade, in es men , and o e all
economic s abili y has a ac ed he a en ion o nume ous schola s. Geopoli ical isks
shape he decision-making p ocesses o co po a e in es o s, cen al banke s, and
inancial expe s, and hey a e o en a ocal poin in media discussions (Calda a e al.,
2018). S a es’ s a egic use o geopoli ical le e age o con ol and compe e o e i o y
can ha e de imen al e ec s on ade and in es men (Pollins, 1989; Balcila e al.,
2018). These isks can in luence a ious economic pa ame e s, such as cu ency
exchange a es, go e nmen iscal policies, and cen al bank mone a y policies (Engel,
2014; Muelle e al., 2017). Mo eo e , income inequali y wi hin a na ion can be
a ec ed by he in e play o hese economic, inancial, and poli ical isks, as
demons a ed by s udies on income dis ibu ion pa e ns (Lee and Lee, 2018; Chiu and
Lee, 2019; Lee e al., 2021).
Economic Policy Unce ain y (EPU) ep esen s ano he c i ical dimension o
policy- ela ed isks. EPU occu s when he e is ambigui y ega ding he di ec ion and
s eng h o mone a y policy, causing unce ain y among businesses and indi iduals
abou u u e economic condi ions (Le and Zak, 2006; Gulen and Ion, 2016). This
unce ain y can signi ican ly impac mac oeconomic ac o s. Fo example, a sudden
inc ease in sho - e m EPU in China can s i le economic g ow h, in es men , and
consump ion (Huang and Guo, 2015; Hu and Liu, 2021). EPU can also de e o eign
capi al in lows and al e capi al mo emen pa e ns, pa icula ly in eme ging economies
1 h ps://im .o g/ex e nal/pubs/ /a /2017/eng/index.h m
Assessing Policy- ela ed Risk and Expo Dynamics: E idence om 16 Economies 423
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(Xiao en e al., 2018). Fu he mo e, EPU has been shown o educe employmen a es,
especially in i ms wi h di e en owne ship s uc u es (Yang M, 2018). T ade secu i y
policy unce ain y is ano he aspec o EPU ha can inhibi in es men by inc easing
cash cos s and educing ma ginal e u ns (Ca ballo e al., 2018).
Poli ical isks, including geopoli ical and economic policy unce ain ies, a e c ucial
de e minan s o a na ion’s inancial s abili y. Poli ical ins abili y, o en a ising om a
combina ion o social, poli ical, cul u al, and economic ac o s, can se e ely impede
economic p og ess by c ea ing unce ain y abou u u e policy di ec ions (Tabassam e
al., 2016; Gu gul and Lach, 2013; Mu ad and Alshyab, 2019). This ins abili y can lead
o subop imal mac oeconomic policies, equen policy changes, and lowe economic
g ow h a es (Aisen and Veiga, 2013; Soybilgen e al., 2019). The nega i e impac o
poli ical ins abili y on expo s has been documen ed in a ious con ex s, such as Egyp
(Khalil e al., 2020). Hence, he policy- ela ed isk mechanism is s ill an empi ical
ques ion wi h a li e a u e gap.
Many schola ly s udies ha e ocused on he e ec s o ac ual poli ical o geopoli ical
dis up ions and economic unce ain y on economic g ow h, ade low, ou ism, e c.
Ne e heless, hese occu ences exempli y a single aspec o he b oade ange o
global ola ili y. These isks a e expec ed o ha e an impac on expo s. Howe e ,
he e is a lack o esea ch on he e ec s o policy- ela ed isk on he expo o goods
and se ices. Ou s udy aims o ill he gap o esea ch and in es iga e he impac o
coun y-speci ic GPR, Poli ical Risk, and economic policy unce ain y indices on
expo ela ionships o 16 de eloped and de eloping coun ies. This s udy builds upon
he esea ch conduc ed by Calda a e al. (2018), which ocused solely on examining
he o e all ade o he Uni ed S a es, including bo h o al expo s and impo s. We
ex end he esea ch o Lee e al. (2021) on Policy- ela ed isk and co po a e inancing
beha iou ; in ou pape , we use he same policy- ela ed isk da a o a coun y base
and i s e ec on he expo o goods and se ices. Ou analysis ocuses on expo
pe o mance because he coun ies in ou da a se comp ise 16 leading economies,
many o whom a e la ge ade pa ne s. This idea means ha expo s om one coun y
o en ep esen impo s o ano he coun y. To a oid edundancy and because impo
pe o mance is closely ela ed o expo dynamics in ou sample, we ocus on expo s
and cap u e he di ec ou wa d economic impac o policy- ela ed isks. To balance ou
analysis and accoun o expo pe o mance in e ms o ade, we include impo
pe o mance as a con ol a iable in ou empi ical models. This enables us o iden i y
424 Rizwan Akh a Jamsheed
ⓒ Ko ea Ins i u e o In e na ional Economic Policy
he impac o policy- ela ed isks on expo s and con ol o any spillo e e ec s
h ough he impo side.
This esea ch uses annual da a om 1998 o 2022 o analyze how di e en policy
isks in luence expo decisions. I makes se e al key con ibu ions o he exis ing
li e a u e. Fi s , i ex ends he cu en body o knowledge by assessing he impac o
mul iple isk indica o s on expo s. I o e s a mo e comp ehensi e e alua ion han
p io s udies ha p edominan ly ocused on single measu es, o en using global
geopoli ical isk da a. In con as , his s udy u ilizes coun y-speci ic geopoli ical isk
da a, p o iding mo e p ecise insigh s in o he e ec s o coun y-speci ic a he han
global isks. Addi ionally, we inco po a e coun y-le el economic unce ain y da a and
poli ical isk da a o iden i y which ype o isk impac s expo s mo e signi ican ly.
This app oach allows he s udy o co e h ee dis inc dimensions o isk.
Second, a ious diagnos ic es s a e conduc ed o he empi ical analysis o ensu e
da a alidi y and model obus ness. We employ h ee models: Fixed E ec s, 2-s age
Leas Squa es (2SLS), and he 2-s ep Gene alized Me hod o Momen s (GMM). The
use o mul iple models aims o alida e ou esul s comp ehensi ely. Diagnos ic es s
indica ed he p esence o endogenei y in he da a, which led us o adop he 2-s ep
GMM model o add ess his issue e ec i ely.
Thi d, we conduc ed a obus ness check by di iding he coun ies in o wo g oups:
i s , acco ding o geog aphy, Wes e n and Eas e n coun ies; in addi ion, we spli
coun ies acco ding o he economic size o de eloped and de eloping coun ies;
u he mo e, we di ided he coun ies acco ding o oil expo and impo ing coun ies.
Addi ionally, we assess he impac o he 2008 inancial c isis on expo pe o mance
and isk. The indings e eal ha while economic policy unce ain y and geopoli ical
isk ha e a nega i e e ec on expo s, poli ical s abili y has posi i ely in luenced
expo pe o mance. The analysis also shows dis inc egional di e ences, wi h bo h
geopoli ical isk and economic policy unce ain y ad e sely a ec ing expo s in
Wes e n and Eas e n egions, albei wi h a ying coe icien s as well; as in de eloped
and de eloping coun ies, economic policy unce ain y and poli ical s abili y show he
same e ec wi h di e en coe icien like wes and eas coun ies bu Geopoli ical isk
in de eloped coun ies shows insigni ican e ec and in de eloping coun ies
geopoli ical isk e ec nega i e signi ican impac on expo . The esul s o oil-
expo ing and oil-impo ing coun ies show he same e ec as ou main analysis wi h
di e en coe icien s.
Assessing Policy- ela ed Risk and Expo Dynamics: E idence om 16 Economies 425
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The pape is s uc u ed as ollows: Sec ion 2 p o ides a de ailed li e a u e e iew.
Sec ion 3 ou lines he da a sou ces and me hodological app oach used in he s udy.
Sec ion 4 p esen s he empi ical indings and discusses hei implica ions. Finally,
Sec ion 5 concludes wi h key insigh s and sugges ions o u u e esea ch.
II. Li e a u e Re iew
1. Theo e ical F amewo k
Policy- ela ed isks and expo dynamics a e inc easingly ele an in oday’s
globalized economy, mainly h ough he pe spec i e o ins i u ional heo y. The
ins i u ional heo y posi s ha he beha iou o i ms is signi ican ly shaped by he
egula o y and no ma i e amewo ks wi hin which hey ope a e. Economic and policy
unce ain ies can se e ely hinde expo in es men . Resea ch indica es ha o eign
income and ade p o ec ion unce ain y can dampen i ms’ willingness o engage in
in e na ional ma ke s (Tang and Buckley, 2020). Da by e al. (2020) demons a e ha
unce ain y abou ade policies and o eign economic condi ions in e ac s in ways ha
signi ican ly dampen expo in es men , especially du ing pe iods o heigh ened
demand ola ili y. Thei indings highligh ha ade ag eemen s can mi iga e hese
unce ain ies, p o iding a mo e s able en i onmen o expo e s. Speci ically, hey
no e ha US expo s o non-p e e en ial ma ke s would ha e been app oxima ely 6.5%
highe had ade ag eemen s been in place, unde sco ing he alue o ins i u ional
commi men s in s abilizing ade ela ionships (Shabi e al., 2021).
Mo eo e , he dynamics o expo beha iou a e in luenced by he ins i u ional
con ex in which i ms ope a e. Economies wi h obus ins i u ions end o exhibi mo e
s able expo dynamics, as i ms can na iga e unce ain ies mo e e ec i ely h ough
es ablished egula o y p ac ices and suppo sys ems. In con as , i ms in economies
wi h weake ins i u ions may ace g ea e ulne abili y o policy shocks, leading o
e a ic expo pe o mance (Sha ma and Khanna, 2024). The in e ac ion be ween
economic and policy unce ain y can ampli y isks, as go e nmen in e en ions
in ended o add ess economic down u ns may inad e en ly inc ease policy unce ain y,
u he complica ing he expo landscape (A alica e al., 2018). The impo ance o
ade ag eemen s in his con ex canno be o e s a ed. They se e as a mechanism o
educe unce ain y by p o iding p edic able amewo ks o ade, he eby encou aging
426 Rizwan Akh a Jamsheed
ⓒ Ko ea Ins i u e o In e na ional Economic Policy
i ms o in es in expo s. This is pa icula ly c i ical du ing economic down u ns when
unce ain y ends o peak (Dong e al., 2022). The empi ical e idence sugges s ha
s ong ins i u ional amewo ks and ade ag eemen s play a i al ole in mi iga ing he
ad e se e ec s o economic and policy unce ain ies, os e ing a mo e conduci e
en i onmen o expo ac i i ies (Zhang and Hu, 2023). S ong ins i u ions and
e ec i e ade ag eemen s can signi ican ly alle ia e he nega i e impac s o economic
and policy unce ain ies, p omo ing a mo e s able and p edic able en i onmen o
in e na ional ade.
2. Empi ical F amewo k
(1) Poli ical isk and expo
Meli z’s model in ol es he analysis o he e ec s o poli ical ins abili y on he
o eign ma ke en y o any gi en company. In line wi h Meli z’s heo y, expo ing
en e p ises di e in e ms o he baseline le el o p oduc i i y and ixed cos s.
Acco ding o his model, ade libe aliza ion leads o an in e nal ealloca ion o
esou ces since poo i ms lea e ma ke s and e icien i ms expand and pene a e
in e na ional ma ke s. The model also implies a nega i e ela ionship be ween po en ial
ea nings and poli ical ins abili y since he la e inc eases he cos s associa ed wi h
p oduc ion. In poli ically uns able en i onmen s, he ine icien p oduce s p oduce a
e y low-e iciency a es and, in e ec , ge pu ged ou o he ma ke by supe io
p oduce s who can now buy he esou ces le behind by he less e icien p oduce s.
These emaining i ms enjoy a la ge ma ke sha e wi h inc eased e iciency, making
hem mo e compe i i e. Thus, hese mo e p oduc i e companies ea n highe incomes
and a e in a be e place o pene a e o eign ma ke s.
On he o he hand, ine icien companies a e limi ed o domes ic sales due o hei
lesse e iciency han hei i als. Hosny (2017) employed i m-le el da a o show ha
pe cei ed poli ical ins abili y educed sales and employmen g ow h. This esea ch
was he i s o show causali y be ween PI and co po a e pe o mance. A s udy u ilizing
he da a collec ed om he Tunisian En e p ise Su ey no ed poli ical isks as an issue
o conce n, especially in he ou ism sec o , en e p ises wi h ewe employees, and
expo e s (Ma a e al., 2018). They also obse ed ha PI has damaged he g ow h o
companies in Tunisia a e he social uphea als ha accompanied he A ab Sp ing.
Assessing Policy- ela ed Risk and Expo Dynamics: E idence om 16 Economies 427
ⓒ 2024 Eas Asian Economic Re iew
Acco ding o Olney (2016), i was es ablished ha co up ion compels i ms away
om ma ke selec i i y. This p ocess can be linked o he high cos s o ope a ion
incu ed due o co up ion, which hampe s many i ms’ abili y o compe e in he
domes ic ma ke . As wi h co up ion, poli ical ins abili y may ha e he same impac
on he beha iou o he companies since bo h poin o issues o poo go e nance and
lead o a ise in ope a ional cos s. F ed iksson and S ensson (2003) o e ed a model
ha shows he ela ionship be ween poli ical in luence, co up ion, and policy. The
s udy e ealed ha in mos cases, poli ical in luence has a de imen al e ec on he
s ingency o en i onmen al s anda ds/ egula ions whe e e he co up ion index is low.
On he o he hand, he p opensi y o co up ion in a coun y leads o poli ical
in eg i y, inc easing such legisla ion’s igou . Fosu (2003) explo ed how poli ical
ins abili y educed expo s and economic g ow h in sub-Saha an coun ies, spanning
om 1967 o 1986. This also has he e ec o linking poli ical ins abili y o ei he he
capabili ies o a i m o expo as well as poli ical connec ions. Whe eas, in condi ions
o highe poli ical isk, he o mal s uc u es may, in many ways, dilu e so ha hose
companies ha ha e di ec access o poli ical execu i es can wo k hei way h ough
he bu eauc acy wi h g ea e ease. Such ac i i ies include expo licenses, impo , and
quo as gi en o he business o company. Such connec ions o e i ms a compe i i e
edge, mainly when o eign ma ke s a e e en mo e a ac i e han domes ic ones. Thus,
in e na ional expansion in poli ically uns able egions will na u ally go o companies
wi h some o m o poli ical clou o e compe ing i ms.
Many s udies ha e ound signi ican e ec s o poli ical ins abili y on expo
ac i i ies in di e en sec o s and egions. U baniza ion in impo ing coun ies can also
make poli ical ies mo e c i ical, as hese ies can des abilize ood expo s by aising
a i and non- a i ba ie s (Zhou e al., 2023). Geopoli ical ins abili y nega i ely
impac s ade in Russia, p ima ily h ough he media ion o educing o eign di ec
in es men (FDI) (Talamano , 2024). Like in Pakis an, poli ical ins abili y in luences
in e na ional ade and in es men nega i ely, and his also cu bs expo s in he sho
un (Qad i e al., 2020). On he con a y, s onge poli ical ins i u ions ha e led o he
g ow h o expo ac i i ies in educing ansac ion cos s and dec easing he isks o
doing business as he ade be ween I an and he Wes Asia pa ne s p o es whe e he
be e poli ical ins i u ions ha e had a posi i e impac on expo s in di e en
commodi y g oups (Nagheli and Maddah, 2017).
H1. Poli ical s abili y has a posi i e impac on G ow h in G20 coun ies.
428 Rizwan Akh a Jamsheed
ⓒ Ko ea Ins i u e o In e na ional Economic Policy
(2) Geopoli ical isk and expo
The e ec o geopoli ics on in e na ional business has a ac ed much in e es in he
las ew yea s. This e iew, he e o e, syn hesizes in o ma ion om di e en schola ly
sou ces o gi e a clea accoun o his a he complica ed ela ionship. Gup a e al.
(2019) employed a g a i y model o ade low da a o 164 coun ies om 1985-
2013. Based on hei esea ch, hey conclude ha highe geopoli ical isks ha e an
ad e se impac on ade lows, hus implying ha hese isks should be aken in o
accoun when s udying he na u e o in e na ional ade. Calda a and Iaco iello (2022b)
cons uc ed an index o Geopoli ical Risk (GPR) using news da a and showed ha
geopoli ical isk damages in es men , employmen , and economic ac i i y, especially
o expo -dependen i ms. Góes and Bekkez s (2022) s essed he ole o he
in eg a ed and connec ed in e na ional ade sys em in a oiding possible wel a e losses
in geopoli ical ensions and economic isola ion.
Fu he mo e, Soybilgen e al. (2019) analyzed he e ec s o geopoli ical isks on
de eloping coun ies’ economic g ow h, and i was ound ha geopoli ical isk has a
nega i e impac on he GDP g ow h a es. In he ela ed esea ch by Shi e al. (2022),
he au ho s ocused on coun ies’ dependence pa e ns in he cobal ade and he e ec
o coun y isk. Thei s udies es ablish ha impo sou ce isk and ma ke concen a ion
a e high among impo e s and expo e s, whe eas geopoli ical isk educes impo e s’
pe o mance bu inc eases expo e s’ pe o mance. Kim and Jin (2023) and Jin and
Shin (2022) ha e also looked in o he mul i ace ed in e ac ion be ween geopoli ical
isk and in e na ional ade wi h special e e ence o expo -led economies. Choi and
Oh (2022) ex ended he analysis o he changing ade poli ics conce ning Ko ea and
Japan o he global escala ing ensions and ade wa s, demons a ing he signi icance
o he geopoli ical h ea s o ade poli ics. Addi ionally, Khan e al. (2022) explo ed
he ela ionship be ween geopoli ical isk and de ence spending in a ious coun ies,
highligh ing how geopoli ical ensions in luence mili a y budge s and global ade.
Fu he mo e, Khan e al. (2022) s udied he impac o geopoli ical isk on he s abili y
o he Tu kish inancial sys em, emphasizing he epe cussions o egional and global
geopoli ical isks on ade and inancial ma ke s.
H2. Geopoli ical Risk has a posi i e impac on expo s in G20 coun ies.
Assessing Policy- ela ed Risk and Expo Dynamics: E idence om 16 Economies 435
ⓒ 2024 Eas Asian Economic Re iew
expo s (0.324), sugges ing ha a a ou able exchange a e is signi ican ly associa ed
wi h highe expo le els. Among he o he ela ionships, poli ical isk (POLR)
nega i ely co ela es wi h in la ion (-0.414), indica ing ha highe poli ical isk ends
o be associa ed wi h lowe in la ion a es. Geopoli ical isk (GPR) has a weak nega i e
co ela ion wi h bo h poli ical isk (-0.062) and impo s (-0.272). A he same ime, i
is posi i ely associa ed wi h economic policy unce ain y (0.234), sugges ing ha
geopoli ical ensions end o inc ease policy unce ain y. Simila ly, economic policy
unce ain y (EPU) is nega i ely co ela ed wi h GDP g ow h (-0.218), showing ha
highe unce ain y nega i ely impac s economic pe o mance. The co ela ion ma ix
p o ides aluable insigh s in o he complex in e play be ween expo le els, a ious
isks, and mac oeconomic ac o s, highligh ing how di e en isks and economic
condi ions in e ac o in luence expo dynamics.
Table 3. Co ela ion Ma ix
Va iables
EXP
POLR
GPR
EPU
IMP
INF
FDI
GDP
EXG
EXP
1.000
POLR
0.207
1.000
GPR
-0.286
-0.062
1.000
EPU
-0.038
-0.014
0.234
1.000
IMP
-0.031
-0.240
-0.272
0.046
1.000
INF
0.043
-0.414
-0.001
-0.027
-0.051
1.000
FDI
0.187
0.142
-0.142
-0.089
0.209
-0.009
1.000
GDP
0.065
0.236
-0.016
-0.218
0.008
0.138
0.095
1.000
EXG
0.324
0.057
-0.123
0.026
0.313
-0.032
-0.026
0.081
1.000
Sou ce: calcula ed by he au ho .
3. Diagnos ic Tes ing
The indings o many diagnos ic examina ions a e displayed in Table 4 and Figu e 1.
The b eakdown o he Inoue-Ma susaka (IM) es conduc ed by Came on and T i edi
indica es chi-squa e alues o 47.14 o skewness, 249.17 o he e oskedas ici y, and
2.99 o ku osis, all o which ha e p- alues < 0.0838. The esul s decisi ely e u e he
null hypo heses o equal a iance, symme ical dis ibu ion o esiduals, and no mal
ku osis, he eby e ealing he exis ence o he e oskedas ici y in he da a. B eusch–
Pagan/Cook–Weisbe g es yields a chi-squa e alue o 101.99, wi h a p- alue less
436 Rizwan Akh a Jamsheed
ⓒ Ko ea Ins i u e o In e na ional Economic Policy
han 0.0001, con i ming he p esence o he e oskedas ici y in he model’s esiduals.
The Modi ied Wald es de ec s he e oskedas ici y in he ixed-e ec s eg ession
model by iden i ying inconsis en a iances ac oss g oups. In addi ion, he Woold idge
es o au oco ela ion in panel da a p oduces an F-s a is ic o 292.16 wi h a p- alue
o less han 0.0001, showing he exis ence o i s -o de au oco ela ion. The esea ch
sugges s using mo e ad anced econome ic app oaches, such as ixed e ec s, wo-
s age leas squa es (2SLS), and gene alized me hod o momen s (GMM), o add ess
and pe haps ec i y he biases iden i ied in he da a.
Table 4. Diagnos ic Tes
(1) Came on and T i edi’s decomposi ion o he IM- es
Sou ce
Chi2
d
P
He e oskedas ici y
249.17
44
0.0000
Skewness
47.14
8
0.0000
Ku osis
2.99
1
0.0838
To al
299.30
53
0.0000
(2) B eusch–Pagan/Cook–Weisbe g es o He e oskedas ici y
“Assump ion: No mal e o e ms"
Va iable: Fi ed alues o FR
“H0: Cons an a iance"
chi2(1)
101.99
P ob > chi2
0.0000
(3) Modi ied Wald es o G oup-wise He e oskedas ici y in FE eg ession model
“H0: sigma(i)^2 5 sigma^2 o all I”
F
142.42
P ob > F
0.0000
(4) Woold idge es o au oco ela ion in panel da a
“H0: no i s -o de au oco ela ion”
F-s a
292.16
P ob > F
0.0000
No es: This ex ou lines an analysis o diagnos ic es s used o o ecas he likelihood o he e oskedas ici y.
Fou sepa a e es s a e pe o med o e alua e he exis ence o he e oskedas ici y in he esea ch
model. The ini ial es e e s o he decomposi ion me hod in oduced by Came on and T i edi,
widely known as he IM es . In addi ion, he B eusch-Pagan/Cook-Weisbe g es is pe o med. In
addi ion, he Modi ied Wald es is pe o med o assess he exis ence o he e oskedas ici y.
Ul ima ely, he Woold idge es was u ilized o de ec he p esence o he e oskedas ici y.
Sou ces: calcula ed by he au ho .
Assessing Policy- ela ed Risk and Expo Dynamics: E idence om 16 Economies 437
ⓒ 2024 Eas Asian Economic Re iew
Figu e 1. Diagnos ic Tes Resul s
4. Baseline Reg ession
Table 5 and Figu e 2 p esen he indings o an econome ic s udy in which he
a iable being s udied is Expo s. The s udy has h ee models, each displaying
coe icien s, s anda d e o s (in pa en heses), P- alues, and a iance in la ion ac o s
(VIF) o se e al explana o y a iables. The indings o model 1 indica e ha a one-
uni ise in POLR is associa ed wi h a 0.018 uni inc ease in expo s, indica ing a
posi i e co ela ion. The as e isk indica es a s a is ically signi ican p- alue, sugges ing
a dependable posi i e e ec o POLR on expo s. The p esence o an as e isk (*) nex
o he coe icien indica es ha he a iable has achie ed s a is ical signi icance a a
speci ic le el, o en 0.05 o 0.10. Since he e is a single as e isk, i may sugges
s a is ical signi icance a he 0.05 le el.
Acco ding o Model 2, GPR and expo s ha e a nega i e ela ionship. Speci ically,
o e e y one-uni ise in GPR, expo s all by 0.046 uni s. The impo ance o his
a iable indica es ha he nega i e impac is s a is ically signi ican in his model. The
as e isk (*) indica es s a is ical signi icance a a con idence le el 0.05. The esul s o
he Model 3 sugges ha an inc ease in Economic Policy Unce ain y (EPU) hu s
expo s. Speci ically, a one-uni ise in EPU leads o a all in expo s by 0.036 uni s.
Once again, he as e isk (*) indica es s a is ical signi icance, mos likely a 0.05.
438 Rizwan Akh a Jamsheed
ⓒ Ko ea Ins i u e o In e na ional Economic Policy
Table 5. Baseline Reg ession Analysis
Dependen Va iable (Expo s)
Model 1
Model 2
Mode 3
Co. E
(S . E )
VIF
Co. E
(S . E )
VIF
Co. E
(S . E )
VIF
POLR
0.018* (0.009)
1.363
GPR
-0.046 *(0.025)
1.092
EPU
-0.036 *(0.011)
1.06
IMP
1.085***(0.023)
1.226
1.085 ***(0.023)
1.234
1.094 ***(0.023)
1.176
INF
0.199***(0.038)
1.216
0.168 ***(0.035)
1.024
0.169 ***(0.035)
1.023
FDI
-0.059 (0.078)
1.086
-0.052 (0.078)
1.077
-0.037 (0.078)
1.074
GDP
0.163***(0.057)
1.092
0.138 **(0.056)
1.039
0.142 **(0.057)
1.087
EXG
0.001 *(0.001)
1.13
0.001 *(0.001)
1.133
0.001 *(0.001)
1.131
_Cons
2.99***(0.753)
-1.64 **(0.682)
-2.26***(0.699)
Mean VIF
1.185
1.1
1.092
P ob>F
0.000
0.000
0.000
No. o obs
400
400
400
R- squa e
0.880
0.879
0.878
No es: *** p<.01, ** p<.05, * p<.1. Table 5 indica es he esul s o he OLS eg ession app oach. Model 1
indica es he impac o Poli ical s abili y isk on expo ; model 2 indica es he Geopoli ical isk and
expo ; model 3 shows he esul s o Economic policy unce ain y and expo .
Sou ce: Calcula ed by he au ho based on da a collec ed om 1998 o 2022.
Figu e 2. Baseline Reg ession Resul s
Assessing Policy- ela ed Risk and Expo Dynamics: E idence om 16 Economies 439
ⓒ 2024 Eas Asian Economic Re iew
Rega ding he R-squa e alue: The da a’s i o he s a is ical model is shown by a
alue o a ound 0.880, demons a ing a signi ican amoun o explained expo
a iabili y based on he independen a iables. The P- alue o he F- es is ex emely
low (0.000), showing ha he models a e s a is ically signi ican . The mean VIF alue
indica es he p esence o conside able mul icollinea i y in he models. Ou model
indings sugges he absence o subs an ial mul icollinea i y in he model.
5. Main Analysis Resul s
Table 6, 7, and Figu e 3 analysis esul s in ol e u ilizing a ious eg ession models,
including Fixed E ec s, Two S age Leas Squa es (2SLS), and Gene alized Me hod
o Momen s (GMM), in a wo-s ep p ocess o ob ain he indings. These models a e
u ilized o examine he impac s o di e en p edic o s on expo s, de ined as he
dependen a iable. The lagged a iable, deno ed as L, a ec s expo s di e en ly in
a ious models. As an illus a ion, i exhibi s a subs an ial posi i e coe icien in Model
1 o he Gene alized echnique o Momen s (GMM) 2-s ep app oach. A he same ime,
i demons a es a no able nega i e impac in he Two-S age Leas Squa es (2SLS)
echnique. This indica es ha he in luence o p e ious alues on p esen expo s is
subs an ial, bu i di e s depending on he speci ic model being used. The impac o
each a iable on expo s is measu ed by i s coe icien , while he s anda d e o
indica es he accu acy o hese es ima ions. The le el o signi icance is indica ed by
s a s, wi h h ee s a s (***), wo s a s (**), and one s a (*) ep esen ing p- alues less
han 0.01, 0.05, and 0.1, espec i ely. The ixed e ec models ha e high R-squa e
alues, exceeding 0.76, indica ing a solid i . This sugges s ha he models can explain
a signi ican pe cen age o he expo a iabili y. The Hausman es yielded s a is ically
subs an ial indings (p = 0.00), indica ing ha hese models should use ixed e ec s
ins ead o andom e ec s. The Wald chi-squa e s a is ics exhibi a high signi icance
le el ac oss all he models, sugges ing ha he models a e s a is ically signi ican .
The p- alues o AR 1 and AR 2 in GMM models a e used o assess he p esence o
au oco ela ion in he esiduals. I hese p- alues a e mo e signi ican han 0.05, i
indica es no au oco ela ion issues. The Sa gan/Hansen es s p o ide p- alues close o
0.29, indica ing ha he ins umen s employed in he GMM models a e alid. Model
1: Using ixed e ec s, he coe icien o POLR is 0.05, wi h a s anda d e o o 0.017.
I is s a is ically signi ican a he 5% le el, deno ed by **. These indings indica e ha
440 Rizwan Akh a Jamsheed
ⓒ Ko ea Ins i u e o In e na ional Economic Policy
expo s ypically ise when he e is mo e excellen poli ical s abili y and a lack o
iolence. A posi i e coe icien sugges s a bene icial e ec on he dependen a iable
expo . Acco ding o he 2SLS model, he e is a posi i e bu small e ec o a 1-uni
ise in POLR on expo s, esul ing in a 0.018-uni gain. This associa ion has s a is ical
signi icance. Wi hin he GMM model, he coe icien has a posi i e and signi icance
Table 6. Fixed E ec and 2sls Reg ession Analysis
Dependen Va iable Expo s
Fixed E ec
2SLS
Model 1
Model 2
Model 3
Model 1
Model 2
Mode 3
Co. E
(S . E )
Co. E
(S . E )
Co. E
(S . E )
Co. E
(S . E )
Co. E
(S . E )
Co. E
(S . E )
POLR
0.05 **
(0.017)
0.018 *
(0.009)
GPR
-0.042 *
(0.022)
-0.04*
(0.025)
EPU
-0.006 *
(.003)
-0.071 **
(.026)
IMP
0.811 ***
(0.075)
0.846 ***
(.074)
0.96 ***
(0.081)
1.085 ***
(0.023)
1.085 ***
(0.023)
1.094 ***
(0.023)
INF
-0.119
(0.068)
-0.11
(0.072
0.075 **
(0.032)
0.199 ***
(0.038)
0.168 ***
(0.035)
0.169 ***
(0.035)
FDI
0.054
(0.042)
0.034
(0.044)
-0.108
(0.103)
-0.059
(0.078)
-0.052
(0.078)
-0.037
(0.078)
GDP
0.058
(0.065)
0.061
(0.064)
0.143
(0.104)
0.163 ***
(0.057)
0.138 **
(0.056)
0.142 **
(0.057)
EXG
-0.012 ***
(0.003)
-0.012 ***
(0.003)
-0.003
(0.008)
0.001 *
(0.001)
0.001 *
(0.001)
0.001 *
(0.001)
_Cons
10.861***
(2.793)
6.657***
(2.166)
3.042
(2.105)
2.999 ***
(0.753)
1.642 **
(.682)
2.257 ***
(.699)
No. o obse a ion
384
384
400
R- squa e
0.773
0.766
0.764
Yea FE
yes
yes
yes
Hausman es
0.00
0.00
0.00
Wald chi2
430.12
466.2
512.01
P ob > chi2
0.00
0.00
0.00
No es: *** p<.01, ** p<.05, * p<.1. Table 6 shows he esul s o ixed-e ec eg ession and 2SLS
eg ession; model 1 indica es he impac o Poli ical s abili y isk on expo , model 2 indica es he
Geopoli ical isk and expo and model 3 shows he esul s o Economic policy unce ain y and
expo . Fixed e ec and 2SLS eg ession esul s show he same impac o h ee models wi h
di e en coe icien s.
Sou ce: calcula ed by he au ho .
Assessing Policy- ela ed Risk and Expo Dynamics: E idence om 16 Economies 441
ⓒ 2024 Eas Asian Economic Re iew
alue o 0.151 a a 10% le el. This implies ha he posi i e associa ion may hold
consis en ly ac oss a ious es ima e s a egies. The s udy o Fosu (2003) on poli ical
ins abili y and expo pe o mance in sub-Saha an A ica showed a nega i e ela ionship
be ween Poli ical ins abili y and expo pe o mance.
Model 2: The GPR coe icien is -0.042 wi h a s anda d e o o 0.022, and i is
s a is ically signi ican a he 10% le el (*). The p esence o a nega i e coe icien
indica es ha GPR ends o dec ease expo s. The p esence o a nega i e sign signi ies
a ecip ocal co ela ion. A nega i e coe icien in bo h 2SLS (-0.042) and GMM
(-0.514) models indica es ha a ise in GPR is co ela ed wi h a decline in expo s.
This impac is s a is ically signi ican , al hough he con idence le el in he GMM
model is sligh ly lowe . The ad e se consequences sugges ha mo e s ingen
go e nmen policies (pe haps pe cei ed as egula o y o es ic i e measu es) migh
impede expo e o s. These indings indica e ha coun ies wi h mo e geopoli ical isk
Table 7. GMM ( wo-s ep) Reg ession Analysis
Dependen Va iable Expo
Model 1
Model 2
Mode 3
Co. E
(S . E )
Co. E
(S . E )
Co. E
(S . E 0
L
0.691 *** (0.116)
PSR
0.151* (0.131)
L
-0.514 *** (.09)
GPR
-0.225* (0.154)
L
-0.58*** (0.111)
EPU
-0.012** (.005)
IMP
0.691***(0.116)
0.469 ***(0.093)
0.466 ***(0.083)
INF
-.151 (.131)
0.583 * (0.309)
0.092 ** (0.041)
FDI
0.321 **(0.162)
-0.242 (0.173)
-0.006 (0.069)
GDP
0.083 ** (0.039)
0.075 ** (0.036)
0.149 ***(0.048)
EXG
-0.011 * (0.007)
-.017 (.006)
-.003(.005)
_Cons
5.257 * (4.21)
3.317** (3.833)
-1.344** (2.461)
No. o G oups
16
16
16
No. o Ins umen s
185
185
185
AR 2 p - alues
0.755
0.460
0.788
Sa gan/ Hansen es
O e id
0.29
0.29
0.29
No es: *** p<.01, ** p<.05, * p<.1. Table 7 shows he wo-s ep GMM eg ession esul s. Model 1 indica es
he impac o Poli ical s abili y isk on expo ; model 2 indica es he Geopoli ical isk and expo ;
model 3 shows he esul s o Economic policy unce ain y and expo . GMM esul s show he same
impac o h ee models wi h di e en coe icien s wi h Fixed E ec and 2SLS eg ession.
Sou ce: calcula ed by he au ho .
442 Rizwan Akh a Jamsheed
ⓒ Ko ea Ins i u e o In e na ional Economic Policy
Figu e 3. Fixed E ec , 2sls and GMM Reg ession Resul s
expo less in olume. Shi e al. (2022); Wang e al. (2021) also showed he e is a
nega i e ela ionship be ween GPR and ade.
Model 3: The ixed e ec es ima ion shows ha he coe icien o EPU is -0.006,
wi h a s anda d e o o 0.003. This coe icien is s a is ically signi ican a he 10%
le el, as indica ed by he as e isk (*). This sugges s ha highe le els o economic
policy unce ain y a e linked o modes declines in expo s, albei he magni ude o his
e ec is ela i ely mino . A nega i e coe icien in he 2SLS model (-0.071) indica es
ha highe le els o economic policy unce ain y nega i ely impac expo s. The
signi icance o his link is ha inc eased unce ain y po en ially hinde s expo ac i i y.
In con as , he GMM model demons a es a signi ican nega i e coe icien (-0.012)
a a 10% signi icance le el. This sugges s ha mo e unce ain y is associa ed wi h
dec eased expo s in some si ua ions. G eenland e al. (2019) pape also showed a
nega i e impac o policy unce ain y on expo s.
6. Robus ness Check
(1) Financial c isis impac
Table 8 examines he impac o he inancial p oblems in 2008 on he models. A bina y
a iable indica es he e ec o he c ises, wi h 0 ep esen ing he yea s be o e and 1
ep esen ing he yea s a e he c ises. The nega i e coe icien s o he in e ac ion e ms
Assessing Policy- ela ed Risk and Expo Dynamics: E idence om 16 Economies 443
ⓒ 2024 Eas Asian Economic Re iew
(POLFC, GPRFC, and EPUFC) sugges ha hey ha e a de imen al in luence on
expo s, pa icula ly du ing c ises. PSR*FC (POLR and FC in e ac ion): A nega i e
coe icien (-0.035) indica es ha du ing inancial c ises, he Ad e se E ec o POLR
on expo s is in ensi ied. The s a is ical signi icance o his in e ac ion (p < 0.01)
sugges s ha inancial c ises g ea ly enhance he ad e se impac o policy ins abili y
on expo s.
The in e ac ion e m GPR*FC, which ep esen s he in e ac ion be ween GPR and
Financial C isis, has a nega i e coe icien in Model 2, simila o he PSR*FC
in e ac ion e m. I sugges s ha go e nmen measu es ha e an inc easingly de imen al
Table 8. Financial C isis 2008 Impac
Dependen Va iable Expo s
Model 1
Model 2
Mode 3
Co. E (S . E )
Co. E (S . E )
Co. E (S . E )
L
0.191 * (0.174)
POLR
-0.046 *** (0.025)
POLR*FC
-0.035 **(0.029)
L
0.246 **(0.062)
GPR
-0.256 ***(0.09)
GPR*FC
-0.151 **(0.094)
L
0.314 *(0.178)
EPU
-0.024 **(0.01)
EPU*FC
-0.02 **(0.001)
IMP
0.627 ***(0.124)
0.659 ***(0.197)
0.58 ***(0.099)
INF
-0.044*(0.077)
0.038 (0.054)
0.022 (0.053)
FDI
0.108 (0.079)
0.049 (0.054)
0.128 **(.061)
GDP
0.034 (0.035)
0.029 (0.095)
0.022 (0.086)
EXG
0.001 (0.008)
0.016 (0.01)
0.015 **(0.006)
_Cons
8.799 **(4.27)
1.978 (2.441)
2.597 (3.152)
No. o G oups
16
16
16
No. o Ins umen s
185
185
185
AR 2 p - alues
0.206
0.281
0.121
Sa gan/ Hansen
es o e id
0.29
0.29
0.29
No es: *** p<.01, ** p<.05, * p<.1. Table 8 p esen s he indings o he wo-s ep sys em gene alized
me hod o momen (GMM) dynamic panel model, ca ego ized in o h ee ca ego ies. We employed
a inancial c isis e ec on ou model in he obus ness check. Model 1 POLR*FC indica es he
impac o Poli ical s abili y isk on expo an in e ac ion o inancial c ises, model 2 GPR*FC
indica es he Geopoli ical isk and expo an in e ac ion o inancial c ises, and model 3 EPU*FC
shows he esul s o Economic policy unce ain y and expo an in e ac ion o inancial c ises.
Sou ce: calcula ed by he au ho .
444 Rizwan Akh a Jamsheed
ⓒ Ko ea Ins i u e o In e na ional Economic Policy
e ec on expo s du ing inancial c ises. The signi icance h eshold (p < 0.05) is
signi ican ly less obus han PSR*FC bu s ill sugges s a signi ican impac . The s udy
examines he in e ac ion be ween Economic Policy Unce ain y (EPU) and Financial
C isis. The in e ac ion e m in ques ion has nega i e coe icien s in all models,
sugges ing ha he nega i e impac o economic policy unce ain y on expo s is
ampli ied du ing inancial c ises. The cons an s a is ical signi icance ac oss models (p
< 0.05) highligh s inancial c ises’ abili y o magni y unce ain y’s ad e se e ec s on
expo e o s. This indica es ha he inancial p oblems ha e dec eased he expo . In
he obus ness check models, we use he Gene alized Me hod o Momen s (GMM),
which is mo e esilien , o ackle possible endogenei y p oblems.
(2) Regional e ec
Table 9 and Figu e 4 display GMM eg ession indings o expo beha iou , wi h
sepa a e analyses conduc ed o na ions classi ied as “Eas ”(China, India, Japan, Sou h
Ko ea, Russia, B azil) and “Wes .”(Aus alia, Canada, Ge many, I aly, Japan,
Ne he lands, Sweden, he Uni ed Kingdom, Sou h Ko ea, and he Uni ed S a es) Each
model appea s o inco po a e dis inc explana o y a iables wi h hei co esponding
coe icien s, s anda d e o s, and a ious me ics o model alidi y, such as
au oco ela ion and o e iden i ica ion es s. POLR (Poli ical Risk) in Eas e n Coun ies.
In Model 1, he POLR a iable has a signi ican posi i e co ela ion o 0.094,
indica ing ha an escala ion in poli ical isk is linked o a ise in expo s. This sugges s
ha businesses in Eas e n coun ies may inc ease hei expo s o educe unce ain ies
o isks wi hin hei domes ic ma ke . I could also esul om speci ic indus ies, such
as commodi y sec o s, which end o expo mo e when domes ic ins abili y causes he
local cu ency o dep ecia e. In Wes e n coun ies, he POLR a iable also has a
signi ican posi i e co ela ion o 0.18, indica ing ha an escala ion in poli ical isk is
linked o a ise in expo s.
Model 2 GPR (Geopoli ical Risk) Wi h Eas e n Coun ies, he -0.251 coe icien
shows a nega i e and signi ican coe icien o GPR, sugges ing ha inc eased
geopoli ical isks esul in lowe expo le els. Geopoli ical ensions may esul in
empo a y su ges in ce ain expo s, such as mili a y equipmen o c i ical esou ces.
Wes e n na ions: Con e sely, he GPR exhibi s a no ewo hy nega i e coe icien o -
0.099 in Model 2. This implies ha highe geopoli ical isk le els lead o educed
Assessing Policy- ela ed Risk and Expo Dynamics: E idence om 16 Economies 451
ⓒ 2024 Eas Asian Economic Re iew
and poli ical isk. This s udy used a ixed e ec model, 2SLS, and 2-s ep GMM model
o p esen he da a.
We also check he impac o he 2008 inancial c isis on ou s udy model. Resul s
show he nega i e e ec o he economic c isis o 2008 on ou model. Fu he , we
di ided he coun ies in o he eas e n and wes e n egions, and he esul s show he
same e ec o policy- ela ed isk on he expo o goods and se ices bu wi h di e en
coe icien s. Ou analysis o oil-expo ing and impo ing coun ies ound ha poli ical
s abili y has a mo e subs an ial posi i e e ec on expo s in oil-expo ing coun ies
han in impo ing coun ies. This is due o hei dependence on oil ou pu and he need
o a s able poli ical en i onmen . Geopoli ical isk nega i ely a ec s expo s, making
oil-expo ing coun ies mo e ulne able o global oil ma ke dis up ions. Oil ola ili y
is mo e s ongly co ela ed wi h geopoli ical isk in oil-impo ing coun ies. Economic
policy unce ain y signi ican ly educes expo s in oil-expo ing coun ies, indica ing
hei sensi i i y o policy changes.
Fu he mo e, de eloped coun ies ha e mode a e impac s due o weake ins i u ional
amewo ks and go e nance sys ems. Geopoli ical isk a ec s ade pe o mance
di e en ly o de eloped and de eloping coun ies, wi h de eloped coun ies ha ing
s onge ade links and well-es ablished in as uc u e. Economic policy unce ain y
signi ican ly nega i ely a ec s expo s, pa icula ly in de eloping economies.
All ou eg ession models (Fixed E ec , 2SLS, and GMM) show he same
signi ican e ec o policy- ela ed isk on expo goods and se ices wi h di e en
signi icance le els and coe icien s. Resul s e eal ha POLR posi i ely impac s
expo s because poli ical s abili y os e s in es o us and p omo es local and
in e na ional in es men s in c ucial a eas, such as expo -o ien ed businesses. Assuming
poli ical s abili y, he supply chain will be una ec ed by ab up go e nmen al changes
o social u moil. Reliabili y is i al o o ganiza ions ocused on expo s, as imely
deli e y o goods is essen ial. The s abili y o poli ical and economic condi ions o en
leads o he s abiliza ion o cu ency exchange a es. Businesses may e ec i ely plan
and ca y ou expo ac i i ies wi hou acing he po en ial cos swings caused by
exchange a e ola ili y when exchange a es a e s able. Coun ies wi h a s able
poli ical en i onmen a e mo e inclined o engage in nego ia ions and uphold
ad an ageous ade deals.
The p esence o s abili y enhances a coun y’s appeal as a business pa ne . Resul s
o poli ical isk show a nega i e impac on expo s because i may be why Geopoli ical
con lic s equen ly esul in he implemen a ion o ade obs acles, such as a i s,
452 Rizwan Akh a Jamsheed
ⓒ Ko ea Ins i u e o In e na ional Economic Policy
quo as, and penal ies, be ween na ions. Geopoli ical conce ns lead o dis u bances in
wo ldwide supply sys ems. Con lic s o ensions may esul in delays, heigh ened
secu i y h ea s, and ele a ed anspo a ion expenses. Geopoli ical isks can po en ially
e ode economic s abili y in he places hey impac , esul ing in less economic ac i i y
and declining demand o impo ed goods. The dec ease in demand di ec ly a ec s
expo e s who ocus on hese ma ke s. Inc eased geopoli ical dange s a e causing a
decline in con idence among in es o s and consume s wo ldwide. The absence o us
esul ed in dec eased in es men in indus ies ocused on expo ing. Ou esul s o
Economic policy unce ain y also show a nega i e impac on expo s because
Unce ain y in economic policy migh cause en e p ises o pos pone o dec ease hei
in es men s. Economic policy unce ain y encompasses conce ns abou he du abili y
o ade ag eemen s and he le els o a i s. Expo -o ien ed businesses depend on
solid ade ag eemen s o p o ide compe i i e access o in e na ional ma ke s.
Fluc ua ions in cu ency a es can be a ibu ed o economic policy unce ain y.
Expo e s p e e s able exchange a es as a e luc ua ions complica e hei abili y o
es ablish p icing, gene a e p o i s, and compe e in in e na ional ma ke s. Unp edic able
economic policies can cause dis up ions in global supply ne wo ks. Expo e s depend
on an in ica e ne wo k o supplie s, and unp edic abili y may complica e ope a ions
and escala e expenses. Policymake s migh employ ocused ac ics o lessen he impac
o geopoli ical conce ns and unclea economic policies on expo s. These include
o mula ing long- e m inancial plans, implemen ing isk mi iga ion plans, assessing
he e ec s o egula ions, conduc ing egula o y impac analyses, s epping up diploma ic
e o s, nego ia ing bila e al and mul ila e al ag eemen s, p o iding insu ance agains
geopoli ical isk, and c ea ing s a egic s ockpiles and al e na e ma ke s.
Policymake s can add ess geopoli ical isks by bols e ing diploma ic ies, nego ia ing
ade ag eemen s wi h p o isions o mi iga ing poli ical isk, p o iding geopoli ical
isk insu ance, and p omo ing s a egic s o es o necessi ies o al e na e ma ke s.
C ea ing s ong in o ma ion sys ems, encou aging inno a ion and di e si ica ion, and
implemen ing c isis managemen amewo ks a e examples o gene al ac ics. These
ac ics no only lessen he impac o geopoli ical isks and unclea economic policies
bu also make expo indus ies mo e esilien and compe i i e, gua an eeing s eady
expo g ow h in he ace o in e na ional poli ical and economic di icul ies.
The s udy has some limi a ions ha could be co e ed in u u e esea ch. Fu u e
esea ch can examine he impac o policy- ela ed isk on he expo o goods and
se ices sepa a ely. Addi ionally, i can explo e he impac on impo s in a ious
Assessing Policy- ela ed Risk and Expo Dynamics: E idence om 16 Economies 453
ⓒ 2024 Eas Asian Economic Re iew
ading sec o s. In ou s udy, we analyzed a sample o 16 leading economies. To
enhance he obus ness o u u e esea ch, i is ecommended ha he sample size be
expanded o mo e eliable esul s.
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Fi s e sion ecei ed on Oc obe 9, 2024
Pee - e iewed e sion ecei ed on No embe 22, 2024
Final e sion accep ed on No embe 29, 2024
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