Global geopolitical risk and inflation spillovers across European and North American economies

Elie Bouri, David Gabauer, Rangan Gupta and Harald Kinateder

Research in International Business and Finance, 2023, vol. 66, issue C

Abstract: In this paper, we examine the spillovers across monthly inflation rates (measured by the CPI) of advanced North American and European economies. Using data covering the period from May 1963 to November 2022 and a time-varying spillover approach, we show that the total spillover index across the inflation rates spiked during the Russo-Ukrainian war, exceeding its previous peak shown during the 1970s energy crisis. Notably, we apply a quantile-on-quantile regression and reveal that changes in the total spillover index are positively associated with lagged changes in the global geopolitical risk (GPR) index. More specifically, changes in the GPR index are positively impacting all future changes in the inflation spillover index, whereas the GPR Acts index is only positively associated with large future changes in the inflation spillover index. Given that rising levels of inflation are posing risks to the financial system and economic growth, these findings should matter to the central banks and policymakers in advanced economies.

Keywords: CPI; Inflation spillovers; Geopolitical risk; TVP-VAR; Dynamic connectedness (search for similar items in EconPapers)
JEL-codes: C32 C5 G15 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:66:y:2023:i:c:s0275531923001745

DOI: 10.1016/j.ribaf.2023.102048

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