Title page
Contents
Abstract 2
Non-technical Summary 3
1. Introduction 6
2. Methodology 8
3. Empirical Application 10
3.1. Estimating Geopolitical Risk shocks 10
3.2. Disentangling the role of non-linearities 13
3.3. When the size of the shock matters 16
3.4. Decomposition over selected historical events 17
3.5. Robustness 21
3.6. Impact on prices: The role of Threats vs Acts 24
4. Conclusion 26
References 28
A. Appendix: Table 32
B. Appendix: Robustness and additional figures 33
C. Appendix: GPRA vs GPRT 39
Figure 1. The Impact of Increased Geopolitical Risk 12
Figure 2. The Estimated Geopolitical Risk Shock and its square 13
Figure 3. Impulse Response Functions of the VARX: Linear vs Quadratic GPR shock 15
Figure 4. Impulse Response Functions of the VARX summing the linear and the non-linear responses to a GPR shock 18
Figure 5. Historical Decomposition over Specific Episodes with Different Level of Geopolitical Risk 20
Figure 6. Robustness on uncertainty measures 23
Figure 7. GPRA vs GPRT: Oil and Prices 26
Appendix Table B1. Variables Used in the Analysis, Their Descriptions, Sources and Transformation 32
Appendix Figure B1. Impulse Response Functions of the VARX using the linear and the non-linear GPR shock 33
Appendix Figure B2. Robustness: p=8 34
Appendix Figure B3. Robustness: p=12 35
Appendix Figure B4. Robustness: SVAR in difference 36
Appendix Figure B5. Robustness: Caldara-Iacoviello Sample 1980-2019 37
Appendix Figure B6. Caption 38
Appendix Figure B7. Caption 38
Appendix Figure C1. GPRA vs GPRT shocks 39
Appendix Figure C2. GPRA shock: Linear vs Non-Linear responses estimated from the VARX 40
Appendix Figure C3. GPRT shock: Linear vs Non-Linear responses estimated from the VARX 41
Appendix Figure C4. GPRA: IRFs of the VARX summing the linear and the non-linear responses to a GPRA shock 42
Appendix Figure C5. GPRT: IRFs of the VARX summing the linear and the non-linear responses to a GPRT shock 43