Russian Invasion of Ukraine, Geopolitical Risk, and Global Financial Markets

Abstract

Using daily data from 39 different economies, we provide evidence that Russian invasion of Ukraine negatively impacted the global financial markets. Our study has three major takeaways. First, the event increases overall market volatilities, and the escalated daily geopolitical risk (GPRD) helps explain the variations. Second, the GPRD, particularly during the post-invasion week, drives the global stock indices to decline and global currencies to depreciate against the US dollar. Third, the Euro-zone countries are severely affected by the invasion compared to the rest of the world, understandably due to their geographical proximity, ideological distance, and higher energy dependence on Russia.