Geopolitical Risks and Their Impact on Global Macro-Financial Stability: Literature and Measurements

Martin Hodula, Jan Janku, Simona Malovana and Ngoc Anh Ngo

Working Papers from Czech National Bank, Research and Statistics Department

Abstract: In our paper, we provide a review of the literature to identify the main transmission channels through which geopolitical risks (GPR) influence macro-financial stability. We begin by analyzing the existing measures of geopolitical tensions and uncertainty, showing that GPR impacts economic and financial uncertainty episodically, with significant but transient spikes during major geopolitical events. The review then identifies the two principal channels through which GPR affects macro-financial stability: the financial channel, operating through increased uncertainty and heightened risk aversion, leading to shifts in investment portfolio allocations and cross-border capital flows; and the real economy channel, impacting global trade, supply chains, and commodity markets. Using data from the past two to three decades, we provide graphical analyses that confirm the findings in the literature, highlighting the episodic nature of the impact of GPR. These insights underscore the need for policymakers and financial institutions to adopt event-specific approaches to effectively mitigate the adverse effects of geopolitical risks on economic and financial systems.

Keywords: Financial stability; geopolitical risk; global economy; macro-financial impact; uncertainty shocks (search for similar items in EconPapers)
JEL-codes: D80 E32 F44 F51 G15 G2 H56 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-fdg, nep-ifn and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.cnb.cz/export/sites/cnb/en/economic-re ... wp/cnbwp_2024_08.pdf

Related works:
Working Paper: Geopolitical risks and their impact on global macro-financial stability: Literature and measurements (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cnb:wpaper:2024/8

Access Statistics for this paper

More papers in Working Papers from Czech National Bank, Research and Statistics Department Contact information at EDIRC.
Bibliographic data for series maintained by Tomas Karhanek ().