Working Paper: CEPR ID: DP18123
Authors: Yevheniia Bondarenko; Vivien Lewis; Matthias Rottner; Yves Schler
Abstract: Geopolitical risk cannot be measured in a universal way. We develop new geopolitical risk indicators relying on local newspaper coverage to account for different perceptions. Using Russia as a case study, we demonstrate that local geopolitical risk shocks have significant adverse effects on the Russian economy, whereas geopolitical risk shocks identified from English-language news sources do not. We control for restricted press freedom by analyzing state-controlled and independent media separately. Employing a novel Russian sanctions index, we illustrate that geopolitical risk shocks propagate beyond the sanctions channel. Still, sanctions worsen the inflationary impact of geopolitical risk shocks substantially
Keywords: geopolitical risk; risk perceptions; russia; sanctions; shock transmission
JEL Codes: E32; E44; E71; F44; F51; G41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| local GPR shocks (D50) | output (C67) |
| local GPR shocks (D50) | inflation (E31) |
| local GPR shocks (D50) | interest rates (E43) |
| sanctions (F51) | inflation (E31) |
| local GPR shocks (D50) | economic downturns (F44) |
| Anglosphere news sources (F01) | Russian economy (P29) |