Working Paper: NBER ID: w31950
Authors: Joshua Aizenman; Robert Lindahl; David Stenvall; Gazi Salah Uddin
Abstract: We investigate the event-based geopolitical shocks from the Russian invasion of Ukraine on agricultural and energy commodities using daily event-based structural vector autoregression (SVAR). We find that the geopolitical shock affects the markets of wheat (2%), corn (1%) and European natural gas (7.5%). However, substantial heterogeneity is observed among the agricultural and energy markets. Geopolitical risk stemming from the Russia-Ukraine conflict affects the European natural gas market more strongly than the US and Asian markets. The regional segment of natural gas markets could explain this. Finally, our analysis explores how geopolitical news affects the dynamics of stock, currency, and bond markets.
Keywords: geopolitical shocks; commodity markets; Russia-Ukraine conflict; agricultural commodities; energy commodities
JEL Codes: F30; F50; G10; G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| geopolitical shock (F69) | wheat market (Q02) |
| geopolitical shock (F69) | European natural gas market (N74) |
| geopolitical shock (F69) | corn market (Q02) |
| geopolitical shock (F69) | sunflower oil market (Q47) |
| geopolitical shock (F69) | stock market (G10) |
| geopolitical shock (F69) | currency market (F31) |
| geopolitical shock (F69) | bond market (G10) |
| geopolitical shock (F69) | proprietary equity index (G12) |
| geopolitical shock (F69) | general European equity (N24) |