Abstract
Spillover effect refers to the phenomenon that when an economic entity, industry or market encounters a change or shock, its impact is transmitted to other entities, industries or markets. In recent years, 5G, semiconductors and rare earths have successively become geopolitical battlegrounds. In this paper, sparrow search algorithm was used to optimize the parameters of variational mode decomposition (VMD), then use the optimized VMD to decompose the geopolitical risk (GPR), 5G, semiconductor and rare earth time series data, and exploit fuzzy c-means clustering algorithm to obtain low-frequency and high-frequency time series. Finally we investigated the connectedness between GPR and China's 5G, semiconductor, and rare earth industries based on TVP-VAR model in different cycles, as well as between these industries. The findings reveal that there exists risk spillover between GPR and the three industries, which is significantly enhanced under the impact of geopolitical events. In addition, there is heterogeneity in the risk spillover between GPR and these three industries in different cycles. Notably, in the short term, the GPR is the main source of risk, and in the long term, the semiconductor industry has the great impact on GPR, 5G and rare earth industries, indicating that the semiconductor industry has very important geopolitical significance.