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The Impact of Geopolitical Risk on Consumer Expectations and Spending

Author

Listed:
  • Yuriy Gorodnichenko
  • Dimitris Georgarakos
  • Geoff Kenny
  • Olivier Coibion

Abstract

Using novel scenario-based survey questions that randomize the expected duration of the Russian invasion of Ukraine and Middle East conflict, we examine the causal impact of geopolitical risk on consumers’ beliefs about aggregate economic conditions and their own financial outlook. Expecting a longer conflict leads European households to anticipate a worsening of the aggregate economy, with higher inflation, lower economic growth, and lower stock prices. They also perceive negative fiscal implications, anticipating higher government debt and higher taxes. Ultimately, households view the geopolitical conflict as making them worse off financially and it leads them to reduce their consumption.

Suggested Citation

  • Yuriy Gorodnichenko & Dimitris Georgarakos & Geoff Kenny & Olivier Coibion, 2025. "The Impact of Geopolitical Risk on Consumer Expectations and Spending," NBER Working Papers 34195, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:34195
    Note: EFG ME
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    More about this item

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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