The Impact of Geopolitical Risk on Consumer Expectations and Spending

Yuriy Gorodnichenko, Dimitris Georgarakos (), Geoff Kenny and Olivier Coibion ()
Additional contact information
Dimitris Georgarakos: European Central Bank
Geoff Kenny: European Central Bank
Olivier Coibion: University of Texas at Austin

No 18084, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: expectations; risk; war; international conflicts; geopolitics; Consumer Expectations Survey. (search for similar items in EconPapers)
JEL-codes: D1 E2 E3 F5 (search for similar items in EconPapers)
Date: 2025-08
References: Add references at CitEc
Citations:

Downloads: (external link)
https://docs.iza.org/dp18084.pdf (application/pdf)

Related works:
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:iza:izadps:dp18084

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().