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The economic impact of conflict-related and policy uncertainty shocks: the case of Russia

Author

Listed:
  • Marina Diakonova

    (Banco de España)

  • Corinna Ghirelli

    (Banco de España)

  • Javier J. Pérez

    (Banco de España)

  • Luis Molina

    (Banco de España)

Abstract
We show how policy uncertainty and conflict-related shocks impact the dynamics of economic activity (GDP) in Russia. We use alternative indicators of “conflict”, relating to specific aspects of this general concept: geopolitical risk, social unrest, outbreaks of political violence and escalations into internal armed conflict. For policy uncertainty we employ the workhorse economic policy uncertainty (EPU) indicator. We use two distinct but complementary empirical approaches. The first is based on a time series mixed-frequency forecasting model. We show that the indicators provide useful information for forecasting GDP in the short run, even when controlling for a comprehensive set of standard high-frequency macro-financial variables. The second approach, is a SVAR model. We show that negative shocks to the selected indicators lead to economic slowdown, with a persistent drop in GDP growth and a short-lived but large increase in country risk.

Suggested Citation

  • Marina Diakonova & Corinna Ghirelli & Javier J. Pérez & Luis Molina, 2022. "The economic impact of conflict-related and policy uncertainty shocks: the case of Russia," Working Papers 2242, Banco de España.
    • Handle: RePEc:bde:wpaper:2242
    DOI: https://doi.org/10.53479/23707
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    GDP forecasting; natural language processing; social unrest; social conflict; policy uncertainty; geopolitical risk;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean

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