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Macroeconomic Consequences of the War in Ukraine on Central and Eastern European Economies: A SVAR Analysis

Author

Listed:
  • Daniel Daianu

    (Romanian Fiscal Council)

  • Tudor Grosu

    (National Bank of Romania)

  • Andrei Neacsu

    (Bucharest University of Economic Studies)

  • Andrei Tanase

    (National Bank of Romania)

  • Radu Vranceanu

    (ESSEC Business School and THEMA (UMR 8184) - ESSEC Business School - THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université)

Abstract

This paper investigates the macroeconomic effects from the Russian invasion of Ukraine in February 2022 on the economies of Bulgaria, Czechia, Hungary, Poland and Romania, using a SVAR model based on a similar analytical framework as that described in Bruhin et al. (2023)[3]. The exogenous shock is captured by the geopolitical risk index developed by Caldara and Iacoviello (2022) [4]. Simulations show that, by the end of 2022, the war contributed to a rise in inflation by 0.45-0.85 percentage points and a drop in GDP by 0.79-1.55 percentage points compared to the counterfactual "no-war" scenario. Our findings suggest a generally larger impact on economic activity in CEE countries compared to Western European economies, a result that can be attributed to the structural weaknesses of these economies, and to the geographic proximity to the conflict area, which led to a higher volatility of the series in the CEE region. Regarding inflation, the uncertainty bands suggest that the war's impact could have been larger, potentially reaching up to 3 percentage points.

Suggested Citation

  • Daniel Daianu & Tudor Grosu & Andrei Neacsu & Andrei Tanase & Radu Vranceanu, 2024. "Macroeconomic Consequences of the War in Ukraine on Central and Eastern European Economies: A SVAR Analysis," Working Papers hal-04842739, HAL.
    • Handle: RePEc:hal:wpaper:hal-04842739
    Note: View the original document on HAL open archive server: https://essec.hal.science/hal-04842739v1
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