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This study examines the impact of political risk on financial markets by leveraging high-frequency (minute-by-minute) price data and precise event timestamps from media outlets' Twitter feeds during Pedro Castillo's failed coup attempt in Peru. Unlike previous research that relies on low-frequency data and protracted political changes, our analysis demonstrates that daily closing prices may misleadingly suggest negligible impact. In contrast, high-frequency data reveal that markets promptly and accurately incorporated news of the coup attempt and, in turn, its failure into asset prices. Our analysis shows that breakdowns in democratic governance negatively affect asset prices, while the restoration of the rule of law, in the form Congressional checks on the Executive branch, boosts them. Moreover, our analyses suggest that domestic companies and sectors with less mobile assets are more vulnerable to these political risks. Our findings underscore the crucial role of high-frequency data in accurately capturing how institutions and political risk affects equity markets. [ABSTRACT FROM AUTHOR]

For many years, economic growth has been one the main objectives of economies around the world. Recently, the central focus has diverted from the quantitative to the qualitative approach. Mainstream research acknowledged that institutional quality along with country risk is among the most significant factors that contribute to the achievement of high economic development rates. Country risk is associated with the probability that investors or companies from a certain country will face greater instability or losses and includes financial, economic, and political risks. Lower political risk ranks first in the category of main drives that enable countries to attract more foreign direct investments and allow markets to operate efficiently. This article examined the recent evolutions in terms of the concept and main antecedents of the political risks, considering the current negative disruptions that economies were forced to experience, covering aspects related to health, wars, and economic downturns. The analysis identified that a high political risk negatively impacts demographics, environment, and the health system. The ability of countries to bounce back and develop a strong resilient economy toward adverse shocks depends on the institutional quality and the effectiveness of policymakers, who are responsible for elaborating efficient economic policies. [ABSTRACT FROM AUTHOR]

Commodity-exporting economies display procyclicality with the price of commodity exports. However, the evidence for the relative importance of commodity price shocks for aggregate fluctuations remains inconclusive. Using Russian data from 2001 to 2018 we estimate a small open economy New Keynesian model with a banking system and leveraged domestic firms who default on their unsecured domestic debt. We show that allowing default rates to vary endogenously over the business cycle amplifies the estimated contribution of commodity price shocks. Endogenous default introduces time-varying wedges that amplify the response of commodity price shocks through demand and income effects rather than the relative price effects that are found in the country risk-premium, balance sheet, and financial accelerator channels. We find that the contribution of commodity prices to explaining fluctuations in GDP rises from 2.5 to 33.6% while for deposits and non-performing loans, it increases from 5.3% and 1.6% to 71.3% and 60.4%, respectively. [ABSTRACT FROM AUTHOR]

The decarbonization of the shipping industry is a critical imperative in the global fight against climate change. Non-EU countries, being significant contributors to shipping emissions, play a crucial role in shaping the industry's sustainable future. However, securing funding for shipping decarbonization initiatives in these countries presents challenges, such as limited access to capital, lack of financial initiatives, political and regulatory uncertainties, technological risks, lack of local expertise, and the effects of global economic volatility. Addressing these challenges demands innovative strategies. The paper explores ways of effectively allocating funds for decarbonization projects in the shipping industry of non-EU countries, Türkiye in particular, using a structured decision-making framework tailored to their specific needs and challenges. We adopt the Moment Integrated Solution Method (THEMIS) to identify the "best" option from the range of alternative strategies identified in the framework. Our findings show that the use of incentive mechanisms is the most prioritized funding alternative, followed by the implementation of a sound Cap-and-Trade system and the promotion of strict local regulations to combat emissions. These imply that the prioritization of funding mechanisms, market-driven approaches, and more stringent regulation are key drivers in maritime decarbonization efforts. The Türkiye case study on strategies to achieve a greener maritime industry in developing countries also shows that securing funding for decarbonization requires a concerted effort by governments, private entities, and international organizations. [ABSTRACT FROM AUTHOR]

Given the significant oil price changes during the past two decades, this paper examines the effect of oil price uncertainty on the sovereign credit risk of four Gulf Cooperation Council (GCC) countries (United Arab Emirates, Qatar, Bahrain, and Saudi Arabia). By utilizing the nonparametric local linear dummy variable estimates (LLDVE), we unveil a significant effect of oil uncertainty on the credit risk mainly during the oil price crash of 2014–2015 and to a lesser extent during the early period of the COVID-19 pandemic. This effect, however, is heterogeneous across the GCC countries. Unlike previous studies, our study controls for structural shifts, nonlinearities, and long-term trends in the relationship between oil price uncertainty and credit risk. Our findings hold important policy implications for policymakers and investors. [ABSTRACT FROM AUTHOR]

This paper studies the impact of political risk on exchange rates. We focus on the Brexit Referendum as it provides a natural experiment where both exchange rate expectations and a time‐varying political risk factor can be measured directly. We build a portfolio model that relates changes in the Leave probability to changes of the British pound's market price, both via expectations and via a political risk factor. We estimate the model for multilateral and bilateral British pound exchange rates. We find that the Leave probability predicts a depreciation of the pound, consistent with the outcome post‐referendum, and that the time‐varying political risk affects exchange rates independently. This paper is part of the Economica 100 Series. Economica, the LSE "house journal" is now 100 years old. To commemorate this achievement, we are publishing 100 papers by former students, as well as current and former faculty. Paolo Manasse obtained his MSc and PhD from the LSE. [ABSTRACT FROM AUTHOR]

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This paper attempts to illustrate the primacy of the Shari’a-compliant murabaha transaction as a means of inconvertibility loss recovery by Islamic political risk insurers. In practical terms, the risk most likely to occur in an underdeveloped Muslim country is the risk of the local currency becoming inconvertible because of a certain action or inaction by the authorities of the host country which is the destination of an export trade transaction, or a foreign direct investment covered under a political risk insurance policy. The political risk insurance (PRI) operator most concerned with the subject of this paper is the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), a member of the Islamic Development Bank (IsDB) Group. Where the PRI operator is established within the auspices of a lending agency which lends in local currency, and provided that the necessary legal arrangements are in place, the PRI’s local currency holdings could be passed on to the lending agency in the host country and the foreign currency equivalent thereof paid over to the PRI operator at its head office. In countries where a lender is not extending local currency financing and a speedy economic recovery is not expected, an attractive alternative for a PRI operator, as the authors argue, is the utilization of the local currency in murabaha transactions. PRI operators’ apprehension about the risk of inconvertibility finds expression in denial of the inconvertibility coverage altogether. Where this is not the case, a PRI operator may impose recovery ceilings, demand the expiry of extended waiting periods, as well as compliance with a variety of other conditions prior to recovery. This paper argues that such measures are self-defeating. A Shari’a-compliant PRI operator is necessarily established to provide coverage against commercial and non-commercial risks in poor Muslim countries. To deny or restrict inconvertibility risk coverage in such countries is unacceptable. Murabaha is a panacea for currency inconvertibility: it is the most popular form of Islamic financing in the world, it is easy to structure, and its profits are almost certainly rewarding. While the risk of non-payment of the price by overseas buyers of Muslim country exports is minimal, risks associated with murabaha could be further minimized by means of export credit insurance coverage by local export promotion agencies. [ABSTRACT FROM AUTHOR]

Chengtou bond is the only asset with market prices that can capture the funding cost of Chinese local government debt. In contrast to the U.S. municipal bonds, Chengtou bonds are issued by private corporations but implicitly guaranteed by local and the central governments, which are reflected by novel risk characteristics--real estate GDP and political risk. One standard deviation increase in local real estate GDP (political risk) corresponds to 10 (9) basis points decrease (increase) in bond yields, respectively. However, conditional on political risk, real estate GDP actually increases bond yields, suggesting that only local governments with low political risk can enjoy the low funding costs driven by high real estate growth. [ABSTRACT FROM AUTHOR]

After the end of the First World War in November 1918, the Allies were involved in a military campaign in the Ottoman lands, leading to a national resistance by Turks that would end in 1923. It is relevant to provide actual information on the outcomes of the Turkish War of Independence, since it was a longlived event that paved the way for further problems on the belligerents' economies. Using unique data for the value of the gold from 1919 to 1925 at the İstanbul bourse, our analysis complements the historical arguments as historians may find political risks difficult to quantify. We observe that in 1921 the Turkish victories created expectations on the part of traders that the war could end soon, as is manifested in exchange rate fluctuations. The Turkish economy would have experienced higher financial instability with the Allies' occupation and resistance in 1920, creating a lower chance to return the pre-war gold content of the belligerents' currencies. [ABSTRACT FROM AUTHOR]

The aim of this paper is to carry out an empirical verification of the occurrence of the political cycle in cities with poviat rights in Poland. Current challenges of local financial management, previous results of national and international research, and threats associated with various types of risks, including political risks, are the motivation for addressing this topic in the paper. The research was conducted using panel data analysis, and its results indicate the existence of a political budget cycle, the effects of which are reflected in the asset and financial situation of cities. The study used balance sheet data, which significantly distinguishes it from previous studies, both domestic and foreign. The results allow us to conclude that balance sheet information should find wider application in monitoring the security and stability of local government finances in Poland. [ABSTRACT FROM AUTHOR]

Placing constraints on elected officials is thought to bind their hands and render government policies credible. In turn, credible policies attract investment because investors can extend their policy and regulatory time horizons. Yet, a scholarship on LMICs suggests that too many constraints on policymakers may preclude necessary reforms, which repels capital. I motivate the study with an example from Liberia. Then, I evaluate political constraints and FDI for 182 countries between 1996 and 2022 and demonstrate that the rule of law conditions relationships between constraints on governments and FDI; in places with high rule of law, constraining government attracts FDI. In contrast, high constraints push investment away in contexts where the rule of law is lower. The logic is that constraining government makes credible high-income governments' previous commitments to property rights and contract enforcement. However, the very same constraints on government may prevent LMICs from making credible commitments in the first place. Constraining government thus prevents desirable reforms under many circumstances, which I illustrate by returning to the Liberia example in the discussion. Ultimately, this study raises questions about universal benefits emerging from policy credibility and extends our understanding of political institutions, credible commitment, and FDI. [ABSTRACT FROM AUTHOR]

The study explores the influence of environmental risk (macroeconomic uncertainty and environmental sustainability risk) on the inflow of foreign direct investment (FDI), utilizing data from 37 economies in sub-Saharan Africa (SSA) from 1996 to 2019. The empirical analyses were carried out using Panel Corrected Standard Error (PCSE) estimation technique. The outcomes show that higher level of uncertainty in GDP growth, inflation uncertainty and financial development volatility induce more FDI inflows whilst uncertainty in exchange rate adversely impacts FDI inflows in SSA. The paper highlights how effectiveness of governance, stable political atmosphere and quality of regulatory structures moderate the relationship between environmental risk and FDI with striking varying outcomes. Consistent with the pollution haven hypothesis, the interactions between governance effectiveness, political stability, regulatory structures and environmental risk suggest that the sub-region is attracted to risk loving speculative investors who prefer poorly regulated and weak governance environment. From policy implication, the findings imply that FDI composition in the sub-region may have moved more towards the speculative type, which may not necessarily be classified as pro-growth in nature. [ABSTRACT FROM AUTHOR]

The Middle East region is recognized by observers as one of the most politically unstable areas worldwide. Due to the significant growth of foreign direct investment in the MENA region during the period before the recent political turmoil, this study empirically tests the impact of these political disturbances on foreign direct investment over time across Arab Spring countries. The study uses panel techniques to estimate the regression models by applying pooled OLS, fixed effect, and random effect. In addition, the Hausman test is used in order to choose the appropriate estimated model between fixed effects and random effects. The sample covers five countries in the MENA region that experienced the Arab Spring uprising during the period (2011–2014). The whole yearly data set ranges from 1980 to 2014. The data describes the periods before and during the Arab Spring turmoil (2011–2014). According to the appropriate fixed effect approach, results show that the economic, social, and political factors are all crucial contributors to FDI movements and volumes in Arab Spring countries. Interestingly, the Arab Spring era plays a very important role in the deterioration of FDI in these countries. The movement of FDI in the Arab Spring region is related to episodes of political instability. This political unrest has created an adverse impact on foreign investment, and this indicates a lack of trust of potential international investors. This study also confirms that other economic and social factors are significant contributors to FDI in the MENA region. [ABSTRACT FROM AUTHOR]

We examine how political risk influences partner selection in multipartner alliances, and consequently their diversity. We propose a two-stage theoretical model—first, a lead firm is selected to lead the alliance; second, the lead firm selects other partners—and we argue that political risk affects both stages. In the first stage, firms with knowledge of and influence in the project country are selected to lead projects in countries with high political risk. In the second stage, the lead firm selects a group of partners with knowledge and influence to ensure that the alliance—as a whole—has the resources needed in such countries. We also show, as a corollary, that the imperative to find these resources drives the lead firm to work with more-diverse multipartner alliances despite the higher coordination costs involved. We test our hypotheses by analyzing, first, the selection of the lead firm in 1,044 multipartner banking syndicates that financed some of the world's largest infrastructure projects in 68 countries between 2003 and 2012. Controlling for the lead firm, we then examine how political risk affects the selection of other partners in the multipartner alliance by comparing the realized syndicates with over 33,000 counterfactual (unrealized) multipartner syndicates. [ABSTRACT FROM AUTHOR]

Using a sample of 124 countries assisted by China from 2000 to 2019, this paper examines the impact of foreign aid on outward foreign direct investment (OFDI) and the mitigation mechanism of risk. The research finds that, first, foreign aid can significantly reduce the country risk of recipient countries, especially political risk and financial risk, and thus play a role in promoting the inflow of OFDI of donor countries, and there is a lagged effect of this role; Second, foreign aid from other countries has a negative impact on China's OFDI to recipient countries, indicating that foreign aid is nonaltruistic and exclusive; Third, the mitigation effect of foreign aid on country risk is achieved through five channels: compensation effect, synergistic effect, pioneer effect, assimilation effect, and redistribution effects. [ABSTRACT FROM AUTHOR]

This study aims to fill the gap in the literature by specifically investigating the impact of country risk on the credit risk of the banking sectors operating in Brazil, Russia, India, China, and South Africa (BRICS), emerging countries. More specifically, we explore whether the country-specific risks, namely financial, economic, and political risks significantly impact the BRICS banking sectors' non-performing loans and also probe which risk has the most outstanding effect on credit risk. To do so, we perform panel data analysis using the quantile estimation approach covering the period 2004–2020. The empirical results reveal that the country risk significantly leads to increasing the banking sector's credit risk and this effect is prominent in the banking sector of countries with a higher degree of non-performing loans (Q.25 = − 0.105, Q.50 = − 0.131, Q.75 = − 0.153, Q.95 = − 0.175). Furthermore, the results underscore that an emerging country's political, economic, and financial instabilities are strongly associated with increasing the banking sector's credit risk and a rise in political risk in particular has the most positive prominent impact on the banking sector of countries with a higher degree of non-performing loans (Q.25 = − 0.122, Q.50 = − 0.141, Q.75 = − 0.163, Q.95 = − 0.172). Moreover, the results suggest that, in addition to the banking sector-specific determinants, credit risk is significantly impacted by the financial market development, lending interest rate, and global risk. The results are robust and have significant policy suggestions for many policymakers, bank executives, researchers, and analysts. [ABSTRACT FROM AUTHOR]

The recent geopolitical uncertainty and the alarming increase in the sovereign credit risk of many countries have motivated us to investigate the potential asymmetric co-movement between geopolitical risk and sovereign credit risk for nineteen countries (China, Russia, USA, Brazil, UK, South Korea, Mexico, Saudi Arabia, Turkey, Sweden, Spain, Norway, Italy, Morocco, France, Bahrain, Abu Dhabi, Japan, and Greece). Using data consisting of Sovereign Credit Default Swap (SCDS), Geopolitical Risk (GPR), and the Quantile-on-Quantile approach (QQA), empirical findings indicate that (i) the effects of GPR on SCDS were heterogeneous, mainly positive, asymmetric, and varied across quantiles and countries; (ii) when the SCDS and GPR are both in upper quantiles, the impacts of GPR are more pronounced; (iii) the countries with the most significant sovereign wealth funds (Norway, China, Saudi Arabia) are less affected by geopolitical uncertainty. [ABSTRACT FROM AUTHOR]

The COVID-19 pandemic and social unrest have focused considerable corporate attention on political risk. The disruptions to company operations are voluminous and diverse: entertainment and hospitality industry closures, airline industry cancellations, eviction moratoriums in residential real estate, international trade interruptions, manufacturing supply shortages, employee vaccination mandates, and ride-hailing service restrictions. Enterprise risk management (ERM) is the mechanism through which boards and their respective firms can manage complex political risks. In the current business climate, more companies should emphasize and integrate political risk oversight in their ERM programs. Although neglecting political risk may not trigger legal liability from regulators or courts, it can cause significant financial and reputational loss to the company. Contemporary corporate boards should not operate with political blinders; they must remain politically sensitive. Politics should not be avoided but managed in a nuanced way pursuant to effective board oversight of ERM. Board political sensitivity is an issue of risk management rather than "wokeness." Companies must contend with courts of law and the court of public opinion, each with its own distinct rules. Missteps in the latter may injure the corporation more seriously than unfavorable judgments in the former. The failure to manage political risk is not in the best interests of the corporation. This Article adds to the legal literature in three important areas. First, it situates political risk within the contemporary ERM discussion. Second, it re-examines how corporations engage with politics in the contemporary context. Finally, it contributes to theories that posit the large modern corporation as a quasi-public institution and argues, with some caveats, that it functions as a quasi-political institution, mandating more robust board oversight of political risks. [ABSTRACT FROM AUTHOR]

This study aims to investigate the extent to which institutional quality influences risk allocation in energy infrastructure public–private partnerships (PPPs) projects in Africa. The analysis covers 396 energy infrastructure PPP projects in 35 African countries over the period 1990–2019 based on the World Bank Private Participation in Infrastructure database and the Worldwide Governance Indicators. Risk is measured through contract classification and relates to the increasing participation of the private sector in more structured forms of PPPs, that is, the private sector supports higher risks as it participates in more structured forms of PPPs. For that purpose, four types of PPPs contracts are considered: management and leases, brownfields, greenfields, and divestitures. The results show that control of corruption, sound government effectiveness, political stability and absence of violence, and strong rule of law significantly and positively influence the risk allocation between the private and public sectors toward the private entity. Conversely, regulatory quality and voice and accountability do not significantly affect risk allocation between the two parties. The estimated effects are much stronger in countries with greater experience in energy infrastructure PPPs projects, suggesting that in addition to institutional quality, private investors are more likely to be interested in taking more risks in energy PPPs projects in experienced countries. While distinguishing between African low-income and middle-income countries, the findings suggest that with the same level of institutional quality, there is a high probability that more risks are allocated to the private sector in middle-income countries compared to low-income countries. Policy recommendations are presented and discussed accordingly. [ABSTRACT FROM AUTHOR]

The Sharing Economy has revolutionized the conception of access and ownership of goods and services, growing at an unprecedented rate over time and across different industries. Given its unique characteristics, it is not possible to analyze these platforms with traditional internationalization theories, so this article offers an alternative to predict which countries may be more attractive for the internationalization of platforms using the Robinson Country Intelligence Index, considering variables such as market access, social conditions, or environmental sustainability. [ABSTRACT FROM AUTHOR]

The study uses wavelet power spectrum and wavelet coherence transformation methodologies to examine how geopolitical risk affected the returns on stocks, oil, and gold during the GFC, COVID-19, and Russia-Ukraine war-three disruptive events that affected the world's financial markets. For better diversification benefits during the turbulent times, we further investigate the degree of co-movement in frequency and time domains. We observe that GPR has high variations during Russia-Ukraine war period compared to COVID-19 period and is shown to have least variation during the GFC period. WTI crude oil and DJGI indexes are observed to have high variations during GFC, and COVID-19 periods followed by Russia-Ukraine war. We further observe that GOLD offers better diversification opportunity as well as leading movement against WTI and DJGI during disruptive events in financial markets. The results provide new understanding of how geopolitical risk affects financial assets for international investors, fund managers, and regulators, which would further aid to find risky and safer haven possibilities during the turmoil periods. [ABSTRACT FROM AUTHOR]

Xu & Ma (2023) develops an intelligent option portfolio model that allows selling options contracts to earn option fees and considers the high leverage of options in the market. Fintech Ho (2023) probes the influence of innovation spillovers in the artificial intelligence (AI) and financial technology (Fin-tech) industries on the value of the internet of things (IoT) companies. Amirteimoori et al. (2023) introduces a stochastic cost-efficiency model to develop a value-based measure of the scale elasticity of firms facing data uncertainty. [Extracted from the article]

The empirical investigation of which risk factor--political or financial--is the optimal driver of country risk in emerging economies in the twenty-first century has grown into a significant and volatile issue in recent decades. This paper investigates the linkages between political risk and financial risk in four Balkan economies (i.e., Greece, Albania, Bulgaria, and Romania) from 1984 Q3 to 2018 Q4, using non-linear autoregressive distributed lag co-integration (NARDL) and wavelet coherence approaches. As a result, findings from the links between political risk and financial risk are being used to provide significant insights into effective urban planning in Balkan cities. The outcomes of the NARDAL analysis indicate that there are short-term and long-term asymmetric links between political risk and financial risk in the Balkan countries except for Romania. The wavelet coherence study also revealed that there is significant vulnerability between political risk and financial risk at different frequencies in the region, also, political risk is a key for predicting financial risk over the selected study period at different frequencies in Albania and Bulgaria. [ABSTRACT FROM AUTHOR]

This study provides fresh evidence regarding the dynamic association that is believed to exist in relation to green finance (GF), economic growth (GDP), political risk (PR), economic risk (ER), and carbon dioxide (CO2) emissions. It therefore uses the dataset pertaining to China from most recent time-series – covering the period spanning from the years of 1990 to 2020, by employing the Morlet Wavelet Analysis technique. The empirical findings of the wavelet power spectrum reveal that green finance GF and ER are vulnerable in the short- and long-run, and the short-run, respectively. At the same time, no vulnerability has been observed in the GDP, PR, and CO2 emissions. In addition to this, the wavelet coherence also reveals the bidirectional causal association that exists between GF-CO2 and ER-CO2, but only in the short run. It must also be taken into consideration that the causal influence of CO2 is deemed to be greater than the GF and ER, respectively. Besides this, a bidirectional causal nexus also exists between the GDP and CO2 emissions, only in the long run. Furthermore, the association between the economic growths follows both the phase and antiphase associations. Moreover, the study also reveals that there is no significant causal link between the PR and CO2 emissions. The results emphasize that the significance of green finance investment will tend to increase with strict policy implications, stabilization or minimization of economic risk and political risk. The same will also take place while promoting environmentally friendly production via economic growth, so as to reduce CO2 emission in the region taken into account. [ABSTRACT FROM AUTHOR]

Caley Horan's I The Insurance Era i examines the marketing, investing and underwriting activities of select segments of the private insurance industry in the United States during the mid-decades of the 20th century. For example, certain forms of gender discrimination in insurance criticised by Horan and documented by Feminist activists in the 1970s and 1980s in fact often significantly benefitted women (with lower life and health insurance premiums), and this probably explains why the feminists lobbying for unisex insurance laws, or for the same rate and coverage for men and women, ultimately failed. If risks are heterogenous, it is of course possible for the insurer to try to do as Horan claims and charge an average pooling premium to all, and still break even, but this is unlikely to be sustainable as a competitive market equilibrium due to the profitable cream-skimming opportunities open to other insurers. [Extracted from the article]

Corruption in the host nation is a key issue influencing foreign direct investment. Most existing studies use the expert-knowledge-based corruption index as a proxy for corruption. However, the validity of these published corruption indexes is often questioned by scholars and experts. By introducing Internet data to evaluate public corruption awareness levels, this paper uses two different corruption proxy variables to investigate the relationship between host country corruption and China's OFDI. In addition, these relationships are further compared between the Belt and Road (B&R) countries and non-B&R countries. The empirical results show that there are negative correlations between host country corruption and China's OFDI flow for the whole sample, B&R countries and non-B&R countries. The empirical results of this paper serve as a reference for Chinese enterprises to make overseas investment decisions. [ABSTRACT FROM AUTHOR]

This study explores the potential determinants of financial stress in the panel of emerging middle-income countries from 2000 to 2016. A variety of driving factors of financial stress classified into domestic, global, and institutional factors besides international linkages and regional dummies are taken. The study uses Principal Component Analysis to develop composite indices for the quality of institutions and financial stress. The authors apply various static and dynamic panel data techniques for robustness analysis. Findings underline the role of institutional quality in mitigating financial stress in these countries. Also, the authors conclude that deterioration in country characteristics and external factors stimulate financial stress in the selected countries. The study calls for strengthening the institutional setup that helps reduce political uncertainty, hence financial stress. It further suggests coordination in fiscal policy and mitigating recessionary trends to manage financial stress. It would have been insightful to evaluate the key drivers of financial stress in future through refined measures of political risk. [ABSTRACT FROM AUTHOR]

We investigate whether fintech development expedites financial inclusion and affects the stability of the financial sector in BRICS economies. We first seek to identify the linkage between Fintech development and financial inclusion in the BRICS economies. We then explore if Fintech poses any threat to financial stability by studying the impact of Fintech on three main factors of financial stability; Country risk, Liquidity, and Price volatility to see any possible threat to financial stability. We apply the robust Global Vector Autoregressive (GVAR) model with Bayesian framework to analyze a monthly dataset ranging from 2015 to 2022. By applying a positive shock to Fintech over financial inclusion and financial stability, we reveal a positive dynamic relationship between fintech development and financial inclusion, with fintech exhibiting a long-term influence on financial inclusion in some BRICS countries than others. However, we found no significant evidence that fintech presents any threat to financial stability; at least not in the short term. We offer several policy implications and future research directions. • This study analyses monthly data of five BRICS economies. • The GVAR model is applied to investigate the impact of fintech on financial inclusion and financial stability. • Fintech significantly promotes financial inclusion in BRICS economies. • Fintech does not threaten financial stability in the BRICS markets. [ABSTRACT FROM AUTHOR]

Sustainable financial development plays a vital role in new institutional economics and transaction cost economics. This asserts the important role of interest and exchange rates and political stability as determinants of an economy's institutional quality. The current study aimed to investigate the effects of the real interest rate, the exchange rate and political stability on foreign direct investment (FDI) inflows in G7 and Gulf Cooperation Council (GCC) countries from 2005 to 2019. The panel fully modified least square and panel dynamic least square estimators used in this study revealed a significant positive long-run relationship between the real interest rate and FDI inflows in the G7 and GCC countries. In addition, there was a significant negative long-run relationship between the exchange rate and FDI inflows in the G7 countries; this relationship was insignificant in the GCC countries. There was also a significant negative long-run relationship between political stability and FDI inflows in the GCC countries; this relationship was insignificant in the G7 countries. The panel least square method confirmed the results of the previous two estimators for the real interest rate and FDI inflows in the G7 countries. Based on these findings, to increase FDI inflows, efforts should be made to lower the lending interest rate and enhance capital formation and trade. Furthermore, market forces should be allowed to determine the real interest rate, and monetary policy should focus on developing a systematic exchange rate to promote political stability and the sustainability of foreign investment in developed and developing countries. [ABSTRACT FROM AUTHOR]

The determinants of FDI inflows have been a subject of unremitting debate in the economic literature over the years. However, the role of country risk has received inadequate attention, especially in the context of the Visegrád countries, which comprise the Czech Republic, Hungary, Poland and Slovakia. Hence, this study examined whether country risk matters for FDI inflows into the Visegrád Four for the period 1991–2020. This study accounted for cross-sectional dependency, structural breaks and heterogeneous slopes in the panel of the four countries by employing the dynamic common correlated effect estimator. Additionally, country-wise fully modified least-squares regression was conducted for each country to test the robustness of the estimates. The empirical results revealed that country risk matters for the FDI inflows into the Visegrád countries, as it has a negative effect on the FDI inflows. Furthermore, both the overall panel and country-wise regressions established that economic and political risks are essential determinants of the FDI inflows, as both have a negative relationship with the FDI inflows. However, financial risk had weak and mixed impacts on the FDI inflows in the overall panel and country-wise regressions, respectively. These research outcomes highlight the need for appropriate macroeconomic and government authorities in the Visegrád economies to enhance the market capabilities of their economies by improving and upholding the social, institutional, corporate and macroeconomic structures, and as a way of achieving better country risk attributes. [ABSTRACT FROM AUTHOR]

Azerbaijan is known for its rich oil and natural gas resources and transit location in the Caspian basin. This article explores current political risks for the energy Multinational Corporations (MNC's) in Azerbaijan. In order to identify a political risk, a literature review is conducted, highlighting four categories proposed by Fitzpatrick as the main framework to understand the conditions giving rise to them. The findings focus on oil price fluctuations, COVID-19 pandemic, war with Armenia, climate change and environmental issues, digitalisation and technology and possible developments in Iran as the new political risks for the energy MNC's in Azerbaijan enforcing foreign investors to reconsider their risk analysis in this country. [ABSTRACT FROM AUTHOR]

The present paper is inspired by the notions of "financial risk" and "financial uncertainties" and transfers their basic reasoning to social science analysis; that is, it develops a theoretical analysis in order to explain social and political change. We know that the degree of social and political change depends on the set of established institutions in a society. Societies can face two extremes: volatility, e.g., rapid changes that lead to instability, which increases the risk of a system or regime collapsing, or rigidity, which does not permit necessary adaptation and change and thus may again increase the risk of the regime collapsing. Thus, an optimal (or ideal) point of change is between the two extremes, permitting change that is neither too sudden and fast nor too slow and inflexible. To illustrate this, we analyze two cases from ancient Greece: Sparta, as a society and state with too many institutional checks and balances that led to rigidity and collapse, and Athens, which in the 5th century BCE had an institutional setting with very limited checks and balances, which again led to near collapse until the late 5th century BCE, when new institutions that were related to some efficient checks and balances were introduced that enabled the state to survive in a world of changing circumstances and balances of power. [ABSTRACT FROM AUTHOR]

Motivation: The COVID-19 pandemic caused a major crisis in global economy. The year 2020 will be remembered in the history of global economy as the year of a massive supply and demand shock, and, consequently, a slump in economic growth in most countries. The effects of the pandemic will be felt to varying degrees by the majority of the world’s economic entities. One such effect is the radical decrease in global foreign direct investment (FDI). It is hard to assess now how heavily the pandemic will influence the long-term FDI trends. The perception of the pandemic risk is, however, likely to heighten. This article deals with foreign direct investment risks, and more specifically, with the pandemic risk seen as one of natural risks in COVID-19-related contexts. Aim: The article aims to identify how the enterprises with Polish capital in Kazakhstan perceive the pandemic risk in comparison with other FDI risks. The authors of this paper were co-investigators on a scientific research project concerning FDI in Kazakhstan as exemplified by the investment intensity of Polish enterprises. The project was carried out from 2019 to 2021, i.e., when the pandemic started and during its course. The research concept was, however, created before there were any signs of the pandemic. Therefore, the research questions regarding FDI risk in Kazakhstan were not to any extent inspired by this occurrence. Nevertheless, the question about the pandemic risk was included in the research tool. Thus, the perception of this risk became the subject of research. The findings of partial research that are presented in this article are original in nature, because the assessments constituting their basis were formulated at a time when Kazakhstan, like other countries around the world, struggled with the pandemic and when its effects were unknown. Results: According to the enterprises with Polish capital in Kazakhstan, the main areas of risk entailed in their operation in this country were, most importantly, the risks of the investment country and global risks. Local currency exchange risk ranked 1st; as many as 70% of respondents said that this risk perception was high. This was followed by global economic events (e.g. depression), performance risks (e.g. product price, transfer risks, the price of capital) and government policy risks (e.g. tax reforms, monetary reforms, price controls, trade restrictions, nationalisation, government regulation, barriers to earnings repatriation). The 5th most distinctly perceived risk by the studied enterprises was global social events risks, including the pandemic risk. 40% of the surveyed entities defined this risk perception as high, and 30% each as medium and small. The fact that the pandemic risk ranked 5th among other FDI risk components in Kazakhstan indicates its great significance to the enterprises operating there at an early stage of the COVID-19 pandemic, i.e., when the level of uncertainty caused by the pandemic in terms of both its economic and its social effects was very high. [ABSTRACT FROM AUTHOR]

Remittances associated with the migrant workforce represent a significant part of the total remittance flows that are transmitted by migrant workers, usually to their families or friends. The volume and frequency of remittance flows is determined by several factors, such as: the number of migrant workers; salaries; economic activity in the country of origin / recipients; exchange rate; political risk; facilities for the transmission of funds; marital status; the level of education of migrants; if the migrant is accompanied by a wife / children; the length of time he migrated; family income level; the rate index calculated between the country of origin and the country of destination. Research on the use of remittances shows that most is used for food, clothing and health services, construction or rehabilitation of housing, land acquisition or other durable goods and only to a small extent "productive investments" (with multiplier effect of creating new jobs). The productive use of remittances represents "any activity that has the potential to generate additional income or to guarantee future expenses". These financial flows as well as labor migration have been severely affected by the COVID-19 pandemic. This paper makes an analysis of the evolution of remittances during this period. [ABSTRACT FROM AUTHOR]

This study examines the impact of political risk on the likelihood of takeover completion and on deal duration. Using a sample of US deals between 2002 and 2019, we find a negative and significant relationship between the takeover completion likelihood and the bidder’s political risk. Our findings also suggest that firms take more time to complete deals when the bidders face higher political risk. As firm-level political risk breeds uncertainty, bidders faced with higher political risk are more likely to cancel bids before closing and delay deal completion. Political shocks can expose acquirers to default risk and make it costly for bidders to raise external funds to undertake mergers and acquisitions (M & As). Our results are robust, after controlling for potential endogeneity concerns. This study examines the impact of political risk on the likelihood of takeover completion and on deal duration. Using a sample of US deals between 2002 and 2019, we find a negative and significant relationship between the takeover completion likelihood and the bidder’s political risk. Our findings also suggest that firms take more time to complete deals when the bidders face higher political risk. As firm-level political risk breeds uncertainty, bidders faced with higher political risk are more likely to cancel bids before closing and delay deal completion. Political shocks can expose acquirers to default risk and make it costly for bidders to raise external funds to undertake mergers and acquisitions (M & As). Our results are robust, after controlling for potential endogeneity concerns. [ABSTRACT FROM AUTHOR]

The paper deals with the analysis of the banking system of Ukraine. It is shown that for Ukraine the frequency and depth of crisis phenomena in the banking sector are exacerbated by the raw material orientation of the economy, underdeveloped domestic market and the circulation of foreign currency (dollarization of the economy). It should be noted that in the pre-crisis during 2006-2007, excessive mortgage lending created a "bubble" in the real estate market, which, comparing its devastating effects, corresponded to this phenomenon in the real estate market in the United States. Although the crisis of 2008- 2009 demonstrated the vulnerability of the Ukrainian banking system to numerous economic and political upheavals, no significant changes in banking supervision took place to minimize systemic risks. Restoration of the banking system of Ukraine in 2015-2016 is generally in line with post-crisis trends to streamline the banking system and increase its efficiency in the world. At the same time, the weakness of the institutional environment makes it impossible to use both administrative tools and state development banks to increase productive lending in Ukraine. On the other hand, commercial banks will use refinancing loans instead of private-sector savings to lend. In this case, the probability of the need for financial support from banks increases, which will lead to a significant increase in public debt. Moreover, a system of vector autoregression models has been developed to research the impact of crisis periods on the performance of commercial banks in Ukraine. The simulation results (mainly the analysis of impulse response functions) allow concluding that interbank lending in post-crisis conditions recovers relatively rapidly (with a lag of two years). Lending to non-financial corporations and non-residents showed a decline and recovery only within four years after the crisis. Lending to the general government sector is growing every year, but at the same time loans to other resident sectors are declining. In addition, during the year after the crisis, the volume of deposits in the banking system is demonstrating a decrease. Other variables do not show any response to the crisis. [ABSTRACT FROM AUTHOR]

This study has been prepared in order to research the forms of application of the Service Export Insurance product on the basis of countries in the world, to determine who prefers this product and in which situations it is applied. Another aim of the study is to research how it can be applied to economic activities in the most efficient way in our country's own dynamics. Service exports in Turkey were included in the coverage of receivables insurance by Turk Eximbank in 2021. The purpose of this insurance is to protect the forward receivables formed by exporting services against commercial and political risks in order to encourage and develop service exports. In the study, the applications of export credit institutions operating in the global market were researched with the literature review method, and based on these examples, suggestions were made by Turk Eximbank about improvements in existing applications and new applications that are not currently available. In consequence of review of the studies in the field of export, it has been seen that there are studies in different fields, but academic studies on service insurance in exports are very limited, and therefore, it is aimed to bring a study to the literature with this study. (This study was produced from a doctoral thesis.). [ABSTRACT FROM AUTHOR]

Over the past decade, there has been an extremely rapid increase in bilaterally financed infrastructure projects globally, as part of China's Belt and Road Initiative (BRI). The BRI is a broad initiative involving many Chinese state-owned enterprises to develop transport and other infrastructure across the developing world, with bilateral financing from either the China Development Bank (CDB) or the China Export–Import Bank (CEXIM). More recently, many large BRI projects have undergone renegotiations with borrower nations or caused financial distress. This provides a useful opportunity to evaluate the BRI through the lens of the obsolescing bargain model. The obsolescing bargain has historically been used to describe the relationship between multinational corporations (MNCs) and the developing countries they invest in. For large capital investments paid off over a long operating period, such as infrastructure projects, the obsolescing bargain describes a shift in leverage from MNCs to the host nation once the capital investment is complete, often leading to renegotiation or even expropriation. This study examines the BRI through the lens of the obsolescing bargain to evaluate the practices of China's state-owned enterprises (SOEs) and policy banks in mitigating political risk. [ABSTRACT FROM AUTHOR]

This paper analyses whether banks with a greater commitment to climate change issues, proxied by the climate change score from the Carbon Disclosure Project (CDP), experience an impact on their credit risk and whether this relationship is moderated by the environmental performance of the country where the bank is located. For these purposes, a panel data analysis is carried out on a large sample of international listed banks over the period 2011–2019. Our findings suggest that the commitment to climate issues lowers the risk level of bank loans when banks have a medium‐high level of attention to these issues. The country location of the bank does play a key role: In countries with better environmental performance, credit risk reduction takes place at lower levels of climate change commitment. This study provides important implications for the actions that bank managers, regulators and practitioners can enact. [ABSTRACT FROM AUTHOR]

The relevance of the topic consists in the fact that due to limited start-up capital, high risk and uncertainty about profitability, lack of experience and, consequently, a positive credit history, venture capital is recognized as the main source of financing the development of many companies in the early stages. The purpose of the paper is to prove the hypothesis of the determining influence of fiscal factors of stimulation of research and development and a set of stable economic and political preconditions for expanding the presence of venture capital in the country. Based on the data of twenty European countries for 2007—2018 (240 observation points), a regression dependence of the amount of invested venture capital on tax preferences in research and development, research and development costs and country risk were constructed. The assessment of the parameters of the created regression model made it possible to prove that it can be used for forecasting volumes of investment of venture capital at the change of the factors of fiscal policy and reduction of macroeconomic risks. The directions of activation of venture financing for the countries are formed: for the development of high technologies and the implementation of innovative ideas, the state should apply tax benefits and preferences for research activities of small and medium enterprises; expansion is necessary for state support for innovation through the consolidation of state and local budgets on research programs, the creation of research and production clusters, technology incubators, support for individuals in their innovation initiatives; the high risk of the country not only leads to a decrease in the inflow of foreign venture capital: domestic investors will withdraw their venture capital and direct it to countries where the political and economic situation is more stable, which further deepens the economic shocks of the national economy and leads to political ones. The implementation of these measures will promote the development of high-tech enterprises, job creation in the country by overcoming the problem of limited financial resources through investment of venture capital. [ABSTRACT FROM AUTHOR]