EFFECTS OF ECONOMIC AND GEOPOLITICAL RISKS ON THE SUPPLY CHAIN: AN ECONOMETRIC ANALYSIS

Year 2024, Volume: 11 Issue: 2, 131 - 141, 31.12.2024

Rahmi İncekara Beyhan İncekara

Abstract

Purpose- The lockdowns and restrictions imposed as part of the response to the COVID-19 pandemic, which first emerged in China, the Russia-Ukraine conflict and its broader geopolitical implications, and tensions in other geographies have exacerbated an already problematic global supply chain situation. While freight markets have limited direct contact with Russia and Ukraine, global logistics have exposed supply chains to an increasing number of risk factors, including airspace restrictions, uncertainty about the future path of consumer demand, and China’s ongoing interventions regarding the COVID-19 process. The effects of various economic and geopolitical risks on the supply chain are the main analysis subject of this study.
Methodology- In accordance with the scope of the study, the causality analysis suggested by Toda Yamamoto was applied between the Baltic Dry Cargo Index (BALTIC) and Brent oil prices (BRENT). In the study, data covering the period 2020:1-2023:12 at monthly frequency was used. In order to examine the relationship between Baltic Dry Cargo Index (BALTIC) and Brent oil prices (BRENT), data regarding the causality analysis proposed by Toda and Yamamoto are shared in tables. Extended Dickey-Fuller (ADF) unit root test was used to analyze the data. The results are presented in tables and interpreted.
Findings- The effects of risks, conflicts and crises that arise in different ways in different geographies on the supply chain are examined in detail with country examples. The problems experienced by countries against supply chain problems, steps taken towards solutions, the effects of crises experienced in the supply chain, and future scenarios are presented in detail in different regions. This study clearly states that geopolitical tensions and the pandemic have dealt a significant blow to the supply chain, and that the disruptions in the supply chain have reached a level that will leave countries helpless
Conclusion In the study, the relationship between the Baltic Dry Index (BALTIC) and Brent oil prices (BRENT) was empirically examined. Contrary to studies in the literature, no significant causality relationship was found between the two variables. In the study, it was emphasized that the cost increases in the supply chain and transportation axis were not due to oil prices, but geopolitical and economic risks. Geopolitical and economic risks arise from pandemics, political instability at international borders, trade conflicts and legislative changes. Increases in risks, tariffs, trade restrictions and sanctions disrupt supply chains, increase costs and hinder market access. The increase in risks experienced in recent years has been a determinant in the disruption of supply chains and the increase in costs.

Keywords

Economics, supply chain, Toda Yamamoto, geopolitical risk, cost of economic risk

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