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The Price of War

Author

Listed:
  • Federle, Jonathan
  • Meier, André
  • Müller, Gernot
  • Schularick, Moritz

Abstract

We assemble a new data set spanning more than 150 years and 60 countries to study the economic impact of interstate war. The economic costs of war are not confined to the war site, where output on average declines by 20 percent and inflation increases persistently by almost 10 percentage points. There are strong spillovers to nearby countries which decline with geographic distance---both for belligerent and third countries. We rationalize these patterns in an international business cycle model: As war destroys the productive capacity of the war site, trade with nearby economies collapses, generating an endogenous supply-side contraction abroad.

Suggested Citation

  • Federle, Jonathan & Meier, André & Müller, Gernot & Schularick, Moritz, 2024. "The Price of War," CEPR Discussion Papers 18834, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18834
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    File URL: https://cepr.org/publications/DP18834
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    Other versions of this item:

    • Jonathan Federle & André Meier & Gernot J. Müller & Willi Mutschler & Moritz Schularick, 2026. "The Price of War," American Economic Review, American Economic Association, vol. 116(3), pages 791-827, March.
    • Federle, Jonathan & Meier, André & Müller, Gernot J. & Mutschler, Willi & Schularick, Moritz, 2024. "The price of war," Kiel Policy Briefs 171, Kiel Institute for the World Economy.
    • Federle, Jonathan & Meier, André & Müller, Gernot J. & Mutschler, Willi & Schularick, Moritz, 2024. "The price of war," Kiel Working Papers 2262, Kiel Institute for the World Economy.

    More about this item

    Keywords

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    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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