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

Marina Diakonova (), Corinna Ghirelli, Javier Pérez and Luis Molina Sánchez
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Marina Diakonova: Banco de España

No 2242, Working Papers from 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.

Keywords: GDP forecasting; natural language processing; social unrest; social conflict; policy uncertainty; geopolitical risk (search for similar items in EconPapers)
JEL-codes: D74 E37 N16 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2022-11
New Economics Papers: this item is included in nep-big, nep-cis, nep-des and nep-tra
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Journal Article: The economic impact of conflict-related and policy uncertainty shocks: The case of Russia (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2242

DOI: 10.53479/23707

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