The Geopolitical Nexus of the Middle East: An Econometric Analysis of Reciprocal Interactions Between Israel and Regional Countries

Abstract

This study empirically examines geopolitical dynamics between Israel and key regional states (Saudi Arabia, Iran, Egypt) from 2002 to 2023. Using a Panel VECM grounded in Security Dilemma, Liberal, and Constructivist theories, we analyze relationships among Israel’s geopolitical risk (ISRGPR), political stability, regional stability, GDP per capita, and military expenditures. Our findings reveal that ISRGPR Granger-causes regional military expenditures, suggesting a direct link between Israel’s risk perceptions and heightened regional tensions. Reciprocal causality is also observed, with regional political stability impacting Israel’s stability and risk. Long-term cointegration shows that increased Israeli political stability and regional GDP heighten Israeli geopolitical risk, which is a paradox central to the security dilemma. This research offers a nuanced empirical perspective on how security is shaped not just by material power, but also by economic factors and socially constructed perceptions. The analysis provides crucial insights for regional policymakers by dissecting these complex feedback loops.

Keywords

Military expenditures panel VECM geopolitical risk Israel Middle East

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