Can geopolitical risks excite Germany economic policy uncertainty: Rethinking in the context of the Russia-Ukraine conflict

The escalating conflict between Russia and Ukraine has increased geopolitical risks and global economic policy uncertainty, leading to an increasingly tense international situation. This paper takes Germany as an example to investigate whether the time-varying risks can transmit from geopolitical risks to economic policy uncertainty. By employing the time-varying Granger -cau-sality tests, we find that (i) the risk transmitting from geopolitical risks and economic policy uncertainty can be affected by the occurrence of the Russia-Ukraine conflict; and (ii) this uni-directional relation owns an asymmetric characteristic, showing that increased geopolitical risks may excite Germany's economic policy uncertainty.

Automated summary

This paper investigates the transmission of risks from geopolitical risks to economic policy uncertainty, using Germany as an example. The study finds that the occurrence of the Russia-Ukraine conflict can affect the risk transmission and this relationship has an asymmetric characteristic, indicating that increased geopolitical risks may stimulate Germany's economic policy uncertainty.