Abstract
This study investigates the effect of Geopolitical risk (GPR) on FDI inflows and outflows in G20 countries from 2002 to 2022. This study employs the PVAR model to analyze the empirical results. The results show that past FDI inflows affect current FDI decisions. Geopolitical risk has a smaller statistical effect on FDI inflows but a larger effect on FDI outflows. The Granger causality test shows that the GPR causes FDI, but FDI does not cause GPR directly. When we demean FDI and risk data, robustness checks confirm the persistence of FDI patterns and the autoregressive nature of risk. The study shows that policymakers need to pay more attention to strengthening economic fundamentals rather than simply focusing on the ability to fend off geopolitical risk. Future research should further assess the characteristics of sector-specific impacts and thoroughly investigate how geopolitical uncertainty impacts investment trends.