Geopolitical risks, monetary trilemma, and global stagflation

Vu Minh Ngo (), Huan Huu Nguyen () and Phuc Nguyen ()
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Vu Minh Ngo: University of Economics Ho Chi Minh City
Huan Huu Nguyen: University of Economics Ho Chi Minh City
Phuc Nguyen: University of Economics Ho Chi Minh City

International Economics and Economic Policy, 2025, vol. 22, issue 3, No 6, 23 pages

Abstract: Abstract The recent global geopolitical events, such as the COVID-19 pandemic and the Russia-Ukraine conflict, have renewed concerns about stagflation. This study examines the impact of political and social shocks on economic growth and stagflation using annual data from 1990 to 2021 for 128 countries. Our findings indicate that significant events like the September 11 attacks, the US-China trade war, and the COVID-19 pandemic have led to a decrease in GDP growth and exacerbation of stagflation. We also explore the moderating effects of monetary trilemma in alleviating or worsening the issues of stagflation created by geopolitical risks. Financial openness correlates positively with stagflation during the US-China trade war and COVID-19 periods, pointing to its potential risk in making economies vulnerable to external shocks. Instead, maintaining stable exchange rates can help curb inflation and consequently prevent and alleviate stagflation.

Keywords: Geopolitical risks; Stagflation; Monetary trilemma; The COVID-19 pandemic (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10368-025-00668-6

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