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Geopolitical Risk Shocks: Macroeconomic Effects in Bolivia, Chile, and Peru

Author

Listed:
  • Osmar Bolivar

    (Ministerio de Economía y Finanzas Públicas)

  • Christian Huanto

    (Ministerio de Economía y Finanzas Públicas)

Abstract

This paper analyzes the macroeconomic impacts of geopolitical risk shocks on Bolivia, Chile, and Peru, employing Bayesian Structural Vector Autoregressive (BSVAR) models. Geopolitical risk shocks significantly raise inflation and interest rates in Chile and Peru, with food and energy inflation being the most affected, while Bolivia shows resilience, presumably due to its distinct economic framework. Commodity prices, particularly energy and agriculture, experience persistent impacts, highlighting the importance of commodity-specific dynamics. The 2022 Russia-Ukraine conflict exacerbated these effects, driving price volatility and global market disruptions. These findings provide insights into some of the transmission mechanisms of geopolitical shocks and highlight the importance of tailored strategies to mitigate their adverse effects.

Suggested Citation

  • Osmar Bolivar & Christian Huanto, 2023. "Geopolitical Risk Shocks: Macroeconomic Effects in Bolivia, Chile, and Peru," Cuadernos de Investigación Económica Boliviana, Ministerio de Economía y Finanzas Públicas de Bolivia, vol. 6(2), pages 62-83, December.
    • Handle: RePEc:efp:journl:v:6:y:2023:i:2:p:62-83
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    More about this item

    Keywords

    Geopolitical risk; BSVAR; Inflation; interest rates; Economic Growth; commodity prices;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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