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Geopolitical risk and sovereign stress in the Euro Area

Author

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  • Frangiamore, Francesco
  • Saadaoui, Jamel

Abstract

Using local projections, this paper documents that neither global geopolitical risk (GPR) shocks nor GPR shocks originating in smaller euro area countries have a significant impact on Euro Area sovereign stress, whereas GPR shocks originating in Germany generate sizable effects, against the backdrop of the recent surge in geopolitical risk following the Russian invasion of Ukraine.

Suggested Citation

  • Frangiamore, Francesco & Saadaoui, Jamel, 2026. "Geopolitical risk and sovereign stress in the Euro Area," MPRA Paper 127823, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:127823
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    File URL: https://mpra.ub.uni-muenchen.de/127823/1/MPRA_paper_127823.pdf
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    References listed on IDEAS

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    1. Theodoros Bratis & Georgios P. Kouretas & Nikiforos T. Laopodis & Prodromos Vlamis, 2024. "Sovereign credit and geopolitical risks during and after the EMU crisis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 3692-3712, July.
    2. Bondarenko, Yevheniia & Lewis, Vivien & Rottner, Matthias & Schüler, Yves, 2024. "Geopolitical risk perceptions," Journal of International Economics, Elsevier, vol. 152(C).
    3. José Luis Montiel Olea & Mikkel Plagborg-Møller & Eric Qian & Christian K. Wolf, 2025. "Local Projections or VARs? A Primer for Macroeconomists," NBER Working Papers 33871, National Bureau of Economic Research, Inc.
    4. Jiang, Yong & Klein, Tony & Ren, Yi-Shuai & Dai, Jia-Hang, 2025. "Through the looking glass: Unveiling geopolitical risks and sovereign bond spillovers in the eurozone," International Review of Financial Analysis, Elsevier, vol. 103(C).
    5. Demiralay, Sercan & Kaawach, Said & Kilincarslan, Erhan & Semeyutin, Artur, 2024. "Geopolitical tensions and sovereign credit risks," Economics Letters, Elsevier, vol. 236(C).
    6. Papavassiliou, Vassilios G., 2025. "On the relationship between geopolitical risks and euro area sovereign bond yields," Finance Research Letters, Elsevier, vol. 75(C).
    7. Afonso, António & Alves, José & Monteiro, Sofia, 2024. "Beyond borders: Assessing the influence of Geopolitical tensions on sovereign risk dynamics," European Journal of Political Economy, Elsevier, vol. 83(C).
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    Keywords

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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • G01 - Financial Economics - - General - - - Financial Crises

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