Nėra lietuvių kalba
Davide Brignone
- 7 August 2024
- WORKING PAPER SERIES - No. 2972Details
- Abstract
- In this paper, we investigate the economic effects of geopolitical risk (GPR) shocks, with a focus on non-linear transmission mechanisms. Using a VARX framework, we show that larger positive shocks have a disproportionately greater impact, pointing to the existence of an amplification channel driven by rising uncertainty. Large GPR shocks trigger precautionary behaviours, leading to sharp declines in consumption and equity prices. In contrast, prices react positively but the responses are overall muted due to offsetting forces from reduced demand and heightened uncertainty. We further show that GPR shocks linked to anticipated geopolitical threats exhibit pronounced non-linearities, significantly increasing oil prices and inflation expectations, thereby exerting upward pressure on domestic prices.
- JEL Code
- C30 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→General
D80 : Microeconomics→Information, Knowledge, and Uncertainty→General
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
F44 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Business Cycles
H56 : Public Economics→National Government Expenditures and Related Policies→National Security and War