Project description
How geopolitics impact global investments
The global power shifts and ongoing conflicts could have an impact on financial globalisation. Understanding the influence of state power on international finance is challenging because changes in this regard are rare. Current research focuses on evidence from the 1970s. However, the EU-funded Great.Power.Finance project will study the impact of geopolitics on global investments spanning the past 200 years. The project will gather data on North-South capital flows and investor returns at a micro-level, encompassing thousands of bonds, stocks and infrastructure projects since 1800. Through extensive data analysis, Great.Power.Finance will examine how changes in global power affect capital distribution, how wars and other events influence investor returns, and how emerging dominant countries leverage infrastructure investments to expand their overseas influence.
Objective
The world is entering a new era of great power rivalry, with the rise of China and the Russia-Ukraine war being only the most visible signs. This proposal asks: What are the implications of these developments for global finance? Will China’s rise accelerate financial globalization or rather reverse it? What do the growing tensions between great powers imply for financial markets around the world? And what motivates China to invest trillions of dollars of state funds into its Belt and Road Initiative (BRI)?
It is difficult to answer these questions, because major shifts in the international order occur only every few generations. We therefore need to look back, but existing research in international finance mostly relies on evidence since the 1970s – from an era dominated by the US and in which states had limited influence on capital flows. As a result, our knowledge on the role of state power in global finance is limited. More generally, the literature on geopolitics and international economics is still in its infancy.
With this proposal, I want to fill these gaps. I use theory, rigorous empirical methods, and comprehensive new data to study how the rise and fall of great powers (or geopolitics) shaped global investments over the past 200 years.
In part one, I embark on a major data gathering effort on North-South capital flows and investor returns at a micro-level, covering tens of thousands of individual bonds, stocks, and infrastructure projects since 1800. In part two, I use this comprehensive new data to analyse: (1) how changes in the international balance of power influence the global allocation of capital; (2) how geopolitical shocks such as wars affect investor returns in the short and long run; and (3) whether and how rising powers use infrastructure investments as a strategic tool to extend influence abroad, in particular to advance their energy security, access to scarce raw materials, and for military control.
Fields of science
Keywords
Programme(s)
- HORIZON.1.1 - European Research Council (ERC) Main Programme
Funding Scheme
HORIZON-ERC - HORIZON ERC GrantsHost institution
24105 Kiel
Germany