Geopolitical risk and inflation: Does central bank independence matter?

Whelsy Boungou, Stevy Darel Moussavou Moussavou and Bossoma Doriane N’doua
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Whelsy Boungou: PSB - Paris School of Business - HESAM - HESAM Université - Communauté d'universités et d'établissements Hautes écoles Sorbonne Arts et métiers université
Stevy Darel Moussavou Moussavou: BSE - Bordeaux sciences économiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Bossoma Doriane N’doua: ESCE PARIS

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Abstract: Does central bank independence shape the inflationary impact of geopolitical risk? Using a panel of 29 countries over 1990-2023, we show that geopolitical risk significantly increases inflation, but that this effect depends on the degree of central bank independence. Higher institutional credibility substantially attenuates, and in some case offsets, the inflationary impact of geopolitical shocks. This moderating effect is stronger for geopolitical threats than for realized actions and is considerably more pronounced in advanced than in emerging economies. These findings highlight the importance of credible monetary institutions in enhancing resilience to geopolitical inflation.

Keywords: Geopolitical risk; Inflation; Central bank independence; Institutional quality (search for similar items in EconPapers)
Date: 2026-09
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Published in Economics Letters, 2026, 268, pp.113171. ⟨10.1016/j.econlet.2026.113171⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05737917

DOI: 10.1016/j.econlet.2026.113171

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