The Impact of Geopolitical Risk on Consumer Expectations and Spending

Yuriy Gorodnichenko, Dimitris Georgarakos, Geoff Kenny and Olivier Coibion

No 34195, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using novel scenario-based survey questions that randomize the expected duration of the Russian invasion of Ukraine and Middle East conflict, we examine the causal impact of geopolitical risk on consumers’ beliefs about aggregate economic conditions and their own financial outlook. Expecting a longer conflict leads European households to anticipate a worsening of the aggregate economy, with higher inflation, lower economic growth, and lower stock prices. They also perceive negative fiscal implications, anticipating higher government debt and higher taxes. Ultimately, households view the geopolitical conflict as making them worse off financially and it leads them to reduce their consumption.

JEL-codes: D01 E20 E3 E50 (search for similar items in EconPapers)
Date: 2025-08
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Working Paper: The Impact of Geopolitical Risk on Consumer Expectations and Spending (2025)
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