Geopolitical risk has become a defining feature of the global economic environment, yet it is typically modeled as an exogenous and transitory shock. This study examines whether geopolitical risk instead exhibits long-memory dynamics, implying that shocks persist and continue to influence risk conditions over extended horizons.
Using monthly geopolitical risk indices from January 1946 to February 2026 at both the global level and across ten influential or strategically exposed countries, this study employs complementary time- and frequency-domain methodologies, including the Hurst exponent, Geweke–Porter-Hudak estimator, Whittle estimator, ARFIMA and ARFIMA-FIGARCH models, to examine the persistence of geopolitical risk levels and volatility.
The results provide robust evidence that geopolitical risk levels and volatility exhibit long-memory behavior, with shocks decaying slowly and remaining persistent well beyond their initial occurrence. These findings suggest that geopolitical risk is better characterized as a persistent rather than purely transitory process, challenging conventional modeling approaches that treat geopolitical shocks as short-lived and independent events.
The findings indicate that models and policy frameworks should account for the persistence of geopolitical risk when assessing long-term uncertainty. They also suggest that, in the context of geoeconomic competition and economic statecraft, the effects of strategic signaling, sanctions and diplomatic actions may extend beyond their immediate impact by influencing expectations over time. While the present study does not directly test these mechanisms, the documented persistence provides a basis for future research examining how geopolitical risk may shape the effectiveness of such policy instruments.
This study is among the first to provide comprehensive global and cross-country evidence on the long-memory properties of both geopolitical risk levels and volatility using a broad set of complementary econometric techniques. By demonstrating that geopolitical risk exhibits persistent long-memory dynamics, the study offers a new perspective for modeling geopolitical uncertainty and supports the development of more realistic forecasting and risk-management frameworks.
