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

Marina Diakonova, Corinna Ghirelli, Luis Molina and Javier Pérez

International Economics, 2023, vol. 174, issue C, 69-90

Abstract: We show that policy uncertainty and conflict-related shocks impact the dynamics of economic activity (GDP) in Russia. We use alternative indicators of “conflict”, referring 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 yield economic slowdown, with a persistent drop in GDP growth and a short-lived but large increase in country risk.

Keywords: Russia; Forecasting; 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)
Date: 2023
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Working Paper: The economic impact of conflict-related and policy uncertainty shocks: the case of Russia (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inteco:v:174:y:2023:i:c:p:69-90

DOI: 10.1016/j.inteco.2023.03.002

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