Large geopolitical shocks have outsized economic impact – paper
Researchers find non-linearities, which amplify effects on economy
Larger-magnitude geopolitical shocks produce marked non-linear dynamics, which greatly amplify their overall economic impact, research from the Bank of England states.
The working paper, by Davide Brignone, Luca Gambetti and Martino Ricci, finds that geopolitical shocks lead to overall rises in prices. However, this is not so much a consequence of the shocks themselves but of the ways in which people react to the resulting uncertainty.
The paper lists two subcomponents of ‘geopolitical risk shocks
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