Thesis Public Defense | VNP30 - Tăng Huy Bảo

The fog of news: how news-based geopolitical risk clouds bilateral trade

Student: Tăng Huy Bảo, VNP-30

Supervisor: Dr. Binyam Demena & Prof.Dr. Nguyễn Trọng Hoài

Abstract:

 The hyper-globalization paradigm after the Cold War is disintegrating and is giving way to a new arena of strategic competition in which economic efficacy and national security rival each other. Although the devastating influence of active war on trade is not much of a secret, the consequences of the ubiquitous threat of war the fear and perception of geopolitical tension remain little known. This study investigates how dyadic Geopolitical Risk (GPR), measured through news media interpretation of conflicts and tensions, influences bilateral size-adjusted trade flows. The results reveal a critical temporal dynamic: GPR does not disrupt trade contemporaneously. Instead, it exhibits a significant “phasing-in” effect, with negative impacts materializing after a
one-year lag and accumulating over a three-year period. A joint GPR shock leads to a three-year cumulative trade reduction of approximately 15%. These results underscore the delayed but consistent nature of the geopolitical uncertainty and how risk perception may erode world economic integration even in the absence of actual conflict situations.

Keywords: Geopolitical Risk, Bilateral Trade, Gravity Model, Phasing-In Effect, News-Based Index