Geopolitical Risk Perceptions
53 Pages Posted: 17 Sep 2024
There are 2 versions of this paper
Date Written: August 05, 2024
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 geopolitical risk shocks identified from local news sources 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 Classification: E32, E44, E71, F44, F51, G41
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