From Tillman and Yun, “Positive factors from Gunboats: U.S. Plane Carriers and Monetary Markets in East Asia” (2025).
Asia, specifically East Asia and the South China Sea, is among the areas which can be significantly uncovered to geopolitical threat. We examine the affect of an elevated presence of the U.S. navy in Asia on asset costs and capital inflows within the area. For that objective, we assemble a novel index from native newspapers reporting on the presence of U.S. Service Strike Teams within the area and estimate the market affect of a shock change on this index. Our findings reveal {that a} larger navy presence causes a rise in inventory costs, an appreciation of the native forex, and an influx of overseas capital, but additionally a better degree of geopolitical threat. Apparently, throughout the first Trump administration, some results change the signal. We additionally distinguish between newspapers reporting on the deployments of U.S. plane carriers associated to tensions with North Korea and people associated to tensions with China.
Listed below are the impulse response features for variables related to Korea and Taiwan.
Be aware that FX is outlined so down is an appreciation of the native forex. CSG = “provider strike group”.
Therefore, the inventory market, forex and fairness inflows reply considerably to surprising appearances of CSGs. In distinction, no such impact is discovered for China.
As an apart, listed here are CSG and ARG deployments as of 6 January 2025:
Supply: USNI, accessed 1/11/2025.
DoD’s annual report on Navy and Safety Developments involving the PRC is right here.
