State-Dependent Effects of Geopolitical Risk on World Trade: Evidence from Network Redundancy

Abstract

This paper asks whether the transmission of geopolitical risk to world trade depends on the redundancy of the global maritime logistics network. We construct a monthly, system-level proxy for logistics redundancy from UNCTAD liner shipping connectivity by computing the effective number of cross-country connectivity sources. Lower values indicate periods in which maritime connectivity is more concentrated and feasible substitution margins are thinner. We then estimate state-dependent local projections for the Global Supply Chain Pressure Index and the CPB World Trade Monitor over horizons of 0–18 months. The estimates indicate that the propagation of geopolitical risk differs between low- and high-redundancy regimes. The state-contingent differences are most visible for global supply-chain pressure, while the estimated trade-volume responses are less precise and should be interpreted cautiously. We summarise these low-minus-high differences as a Redundancy Amplification Effect and assess their cumulative magnitude using moving-block bootstrap inference. Overall, the results provide suggestive evidence that time variation in maritime connectivity concentration is an economically relevant conditioning state for open-economy shock propagation, while also highlighting the limitations imposed by measurement and sample size.