The European Central Bank published an ECB Blog post introducing a new news-based indicator of country-level geopolitical risk built from domestic sources across all European Union countries, and applied it to assess how the shock from Russia’s February 2022 invasion of Ukraine affected European economies. Using the indicator in macroeconomic models, the authors find sizeable and uneven effects of geopolitical risk shocks on real GDP, investment, exports and inflation over 2022-2024, with central and eastern European (CEE) countries more exposed than the euro area overall. The indicator is constructed via automated keyword searches in English-language coverage of leading domestic newspapers and agencies for each EU country (retrieved via Factiva), measured monthly as the share of articles referencing adverse geopolitical developments, while filtering out non-geopolitical references. Perceived geopolitical risk rose most in countries closer to the conflict and in those with stronger pre-war ties and energy dependence on Russia; the post highlights elevated readings for CEE countries and also Austria, Finland and Sweden. A historical decomposition based on region-specific VAR models (controlling for financial volatility and global energy prices) attributes a pronounced drag on activity beyond energy-price effects, including an investment decline of around three percentage points in CEE countries and a net contribution to higher inflation over 2022-2024.
European Central Bank 2025-11-28
European Central Bank blog introduces EU-wide news-based geopolitical risk indicator and quantifies Ukraine-war shock across Europe
The European Central Bank introduced a news-based indicator to assess geopolitical risk across EU nations, focusing on Russia's 2022 invasion of Ukraine. It reveals significant, uneven effects on GDP, investment, exports, and inflation, with central and eastern European countries more affected than the euro area overall. Elevated risk readings were noted in countries closer to the conflict and those with strong pre-war ties to Russia, such as Austria, Finland, and Sweden.