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The economic impact of Russia’s invasion of Ukraine on European countries - a SVAR approach

Author

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  • Jonas M. Bruhin
  • Rolf Scheufele
  • Yannic Stucki

Abstract

We quantify the economic impact of Russia's invasion of Ukraine on Germany, the United Kingdom, France, and Italy using data on historical geopolitical events. Employing a structural VAR approach based on zero, sign, and narrative sign restrictions, and accounting for regional shocks to capture country‐specific effects, our analysis reveals a drag on real economic activity and a significant increase in inflation due to the war. In a counterfactual scenario without the invasion, we find that consumer prices in European countries would have been 2.3% to 5.8% lower in 2023‐Q4. Additionally, global consumer prices would have risen 2.5% less, and energy prices would have been 24% lower. The war also triggered a significant decline in both global and local economic sentiment, resulting in lower consumer confidence and reduced global demand. Without the war, GDP in European countries could have been between 1.4% and 2.4% higher by the end of 2023.
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Suggested Citation

  • Jonas M. Bruhin & Rolf Scheufele & Yannic Stucki, 2023. "The economic impact of Russia’s invasion of Ukraine on European countries - a SVAR approach," Working Papers 2023-04, Swiss National Bank.
    • Handle: RePEc:snb:snbwpa:2023-04
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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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