Russia-Ukraine war and systemic risk: Who is taking the heat?

The Russia-Ukraine conflict has increased systemic vulnerabilities of the global financial system. We develop a database of news events and investigate the systemic risk implications of the conflict on Russia, Ukraine, France, Germany, Italy, the UK, the USA, and China. Results show that systemic instability costs of the conflict go beyond Russia and Ukraine. Sanctions cause systemic risk spillovers to European countries and the USA. Study findings caution against the accumulation of systemic risk as sanctions may adversely affect the rest of the world aside from the main target -Russia.

Automated summary

The Russia-Ukraine conflict is causing increased vulnerabilities in the global financial system, extending beyond Russia and Ukraine to European countries and the USA. The study highlights the spillover effects of sanctions, cautioning against the accumulation of systemic risk.