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Financial market reactions to the Russian invasion of Ukraine

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Abstract

This article analyzes financial market reactions to the Russia-Ukraine war with a focus on the opening weeks. Markets did not completely anticipate the war and asset price reactions strengthened from the first week—when there were hopes for a quick resolution—to the second week, when prices generally peaked and began to partially revert to pre-war values. Exposure to commodity trade and trade with Russia-Ukraine determined market perceptions of the riskiness of equity and foreign exchange assets. Credit default swap prices on sovereign debt and breakeven inflation rates indicate that markets saw the war as a measurable fiscal risk even for non-belligerents.

Suggested Citation

  • Christopher J. Neely, 2022. "Financial market reactions to the Russian invasion of Ukraine," Working Papers 2022-032, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:94820
    DOI: 10.20955/wp.2022.032
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    1. Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
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    5. Christopher J. Neely, 1999. "An introduction to capital controls," Review, Federal Reserve Bank of St. Louis, vol. 81(Nov), pages 13-30.
    6. Christopher J. Neely, 2022. "The Russian Invasion, Oil and Gasoline Prices, and Recession," Economic Synopses, Federal Reserve Bank of St. Louis, issue 10, pages 1-2, April.
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    Cited by:

    1. Nicole Branger & Michael Hanke & Alex Weissensteiner, 2024. "The information content of wheat derivatives regarding the Ukrainian war," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(3), pages 420-431, March.
    2. Hu, Yang & Lang, Chunlin & Corbet, Shaen & Hou, Yang (Greg) & Oxley, Les, 2023. "Exploring the dynamic behaviour of commodity market tail risk connectedness during the negative WTI pricing event," Energy Economics, Elsevier, vol. 125(C).

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    More about this item

    Keywords

    Russia; Ukraine; commodity price; War; oil; capital controls; exchange controls; sanctions; Exchange rate; equity;
    All these keywords.

    JEL classification:

    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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