Geoeconomic Fragmentation and the World Economy

This talk will offer an introduction to the newly emerging topic of geoeconomic fragmentation (GEF), with an emphasis on some of the work undertaken at the International Monetary Fund. The talk will describe the channels through which GEF is expected to impact the global economy. It will present estimates from recent studies on potential global and regional output losses. It will discuss the measurement of geopolitical distance between country pairs and show how this affects international transactions, with a special focus on foreign direct investment. Finally, it will discuss the idea of “connector” countries (vertical and horizontal) that might stand to benefit from a splintering of the global economy into rival blocs.

Shekhar Aiyar is Assistant Director in the IMF’s Research Department. Previously he served as the Fund’s Mission Chief for Germany and Head of the Eurozone Division. He is a Visiting Professor at the National Council of Applied Economic Research (NCAER), a former Visiting Scholar at Johns Hopkins University and a former Non-Resident Fellow at Brueghel. His research interests encompass open economy macroeconomics, international finance, growth empirics and test cricket. His recent work has focused on the likelihood and possible consequences of geo-economic fragmentation. He has published in the Journal of Financial Economics, American Economic Review, European Economic Review, IMF Economic Review, Journal of Economic Growth, Journal of Money, Credit and Banking and Economic Policy. He holds an MA in Philosophy and Economics from Oxford University, and a Ph.D. in Economics from Brown University.