Researchers develop new index to measure geopolitical risk

Heightened threats slow growth and equities returns in advanced economies, paper finds

inflation-risk2

The US Federal Reserve has published a research paper that explains the design and findings of a new index that aims to isolate the economic effects of geopolitical risks.

In Measuring geopolitical risk, Dario Caldara and Matteo Lacoviello use newspaper records to create an index of geopolitical risk since 1985.

What differentiates this new index from existing alternatives is that it “can be used to isolate risks – such as risks of wars and terrorist attacks – that are more likely to be

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