Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/328214 
Year of Publication: 
2025
Series/Report no.: 
IZA Discussion Papers No. 18084
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Using novel scenario-based survey questions that randomize the expected duration of the Russian invasion of Ukraine and Middle East conflict, we examine the causal impact of geopolitical risk on consumers' beliefs about aggregate economic conditions and their own financial outlook. Expecting a longer conflict leads European households to anticipate a worsening of the aggregate economy, with higher inflation, lower economic growth, and lower stock prices. They also perceive negative fiscal implications, anticipating higher government debt and higher taxes. Ultimately, households view the geopolitical conflict as making them worse off financially and it leads them to reduce their consumption.
Subjects: 
geopolitics
international conflicts
war
risk
expectations
Consumer Expectations Survey
JEL: 
D1
E2
E3
F5
Document Type: 
Working Paper

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