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Denise Rößler

14 May 2024
Financial Stability Review Issue 1, 2024
Geopolitical risk can be a threat to financial stability and the global economy. It can adversely affect the economy and financial markets and consequently have a negative impact on the funding, lending, solvency, asset quality and profitability of banks and non-banks alike. Recent history suggests that adverse geopolitical events alone are unlikely to cause a systemic crisis, although they may act as a trigger for systemic distress if they interact with pre-existing vulnerabilities. Looking ahead, policy authorities need to monitor geopolitical risk and assess its possible consequences for financial stability. Financial institutions should apply a combination of sound risk management and business diversification to address geopolitical risk.
JEL Code
G1 : Financial Economics→General Financial Markets
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
9 January 2024
Economic Bulletin Issue 8, 2023
The reaction of oil prices to geopolitical shocks depends on the country of origin. Empirical analysis suggests that instances of rising geopolitical tensions generally put downward pressure on oil prices, reflecting weaker global demand on the back of lower economic activity. However, geopolitical events in some major oil-producing countries may lead to increases in oil prices amid expectations by market participants of disruptions to future oil supply. Oil price pressures arising from these adverse shocks are typically short-lived and disappear after one quarter. However, recent heightened geopolitical uncertainty stresses the need to identify the nature of these shocks to disentangle their effects on oil prices and inflation.
JEL Code
Q02 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→General→Global Commodity Markets
F01 : International Economics→General→Global Outlook
F51 : International Economics→International Relations, National Security, and International Political Economy→International Conflicts, Negotiations, Sanctions