The divergent effects of geopolitical risk on market openness

• We investigate the impact of GPR on market openness. • We consider 23 high-income and 19 middle-income economies from 1998 to 2023. • GPR enhances market openness in high-income economies but hinders it in middle-income economies. • Economic growth and governance consistently promote market openness. • FDI is more effective in middle-income countries. This paper investigates the impact of geopolitical risk on market openness across 23 high-income and 19 middle-income economies from 1998 to 2023. The findings reveal that geopolitical risk enhances market openness in high-income economies but hinders it in middle-income economies. Economic growth and governance consistently promote market openness, whereas foreign direct investment is more effective in middle-income countries. These findings highlight the importance of institutional reforms and tailored policies to attract foreign direct investment and stabilise markets, thereby mitigating the effects of geopolitical risk on market openness. In addition, the findings point toward policy implications for bolstering resilience and openness.