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Uncertainty about the war in Ukraine: Measurement and effects on the German economy

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  • Grebe, Moritz
  • Kandemir, Sinem
  • Tillmann, Peter

Abstract

We assemble a data set of more than eight million German Twitter posts related to the war in Ukraine. Based on state-of-the-art methods of text analysis, we construct a daily index of uncertainty about the war as perceived by German Twitter. We then estimate a VAR model with daily financial and macroeconomic data and identify an exogenous uncertainty shock. The increase in uncertainty has strong effects on financial markets and causes a significant decline in economic activity as well as an increase in expected inflation. We find the effects of uncertainty to be particularly strong in the first months of the war.

Suggested Citation

  • Grebe, Moritz & Kandemir, Sinem & Tillmann, Peter, 2024. "Uncertainty about the war in Ukraine: Measurement and effects on the German economy," Journal of Economic Behavior & Organization, Elsevier, vol. 217(C), pages 493-506.
    • Handle: RePEc:eee:jeborg:v:217:y:2024:i:c:p:493-506
    DOI: 10.1016/j.jebo.2023.11.015
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    References listed on IDEAS

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    More about this item

    Keywords

    War; Twitter; Geopolitical risk; Machine learning; Business cycle;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • G1 - Financial Economics - - General Financial Markets

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