CNB Research Seminar "Going Backwards: Firm-Level Responses to Geopolitical Tensions"

Prague, 17 March 2026

Volker Nitsch (TU Darmstadt)

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Volker Nitsch is a Professor of Economics (International Economics) at the Technical University of Darmstadt, where he leads research and teaching in international trade, international macro-finance, economic integration, and economic geography. He holds a PhD in Economics from Humboldt University Berlin and previously worked at the KOF Swiss Economic Institute (ETH Zurich) and as a junior professor at Freie Universität Berlin. His research has been published widely on topics including borders and trade, capital flows, currency unions, economic diplomacy, central bank governance and related macro-financial issues.

Going Backwards: Firm-Level Responses to Geopolitical Tensions (abstract)

How do firms adapt to geopolitical tensions? We examine the responses of German firms to a major shock of geoeconomic fragmentation, the sudden, surprising and severe deterioration in Germany’s bilateral relationship with Russia in 2014. Faced with an increase in uncertainty after Russia’s breach of international law when it illegally annexed Crimea, firms have quickly taken action to reduce their business exposure to Russia. Our results indicate a sizable, though largely temporary, decline in foreign direct investment. In fact, in contrast to the persistent decline in bilateral merchandise trade, foreign direct investment rapidly recovered. German firms that continue doing business in Russia tend to be small, privately owned, headquartered in former East Germany, and highly specialized in the Russian market.