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Economic knock-on effects of Russia's geopolitical risk on advanced economies: A global VAR approach

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Listed:
  • Blagov, Boris
  • Dirks, Maximilian
  • Funke, Michael

Abstract

Using Russia as a case study and a global VAR model as a methodological tool, we analyze how heightened geopolitical risk shocks propagate across advanced economies and quantify the economic effects of these events. The global VAR impulse response functions in response to the skyrocketing Russian geopolitical risk shock after Russia's invasion of Ukraine revealed a contraction of GDP and an increase in inflation. Eastern European neighboring countries are particularly affected by the Russian geopolitical risk shock. We also document a strong component of the Russian geopolitical risk shock that is not driven by fossil fuel prices.

Suggested Citation

  • Blagov, Boris & Dirks, Maximilian & Funke, Michael, 2024. "Economic knock-on effects of Russia's geopolitical risk on advanced economies: A global VAR approach," Ruhr Economic Papers 1061, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:282988
    DOI: 10.4419/96973231
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    References listed on IDEAS

    as
    1. Hansen, Bruce E, 2002. "Tests for Parameter Instability in Regressions with I(1) Processes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 45-59, January.
    2. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
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    More about this item

    Keywords

    Geopolitical risk; international business cycle transmission; global VAR model; Russia;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism

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