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Uncertainty about the War in Ukraine: Measurement and Effects on the German Business Cycle

Author

Listed:
  • Moritz Grebe

    (Justus Liebig University Giessen)

  • Sinem Kandemir

    (Justus Liebig University Giessen)

  • Peter Tillmann

    (Justus Liebig University Giessen)

Abstract

We assemble a data set of more that 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. The approach also allows us to separate this index into uncertainty about sanctions against Russia, energy policy and other dimensions. 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

  • Moritz Grebe & Sinem Kandemir & Peter Tillmann, 2023. "Uncertainty about the War in Ukraine: Measurement and Effects on the German Business Cycle," MAGKS Papers on Economics 202314, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:202314
    as

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    References listed on IDEAS

    as
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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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