A Simple Model of Geopolitical Risk and Sanctions

Datos Bibliográficos

ID21393030
AutoresVivien Lewis (0000-0002-2048-3340, Deutsche Bundesbank & CEPR Frankfurt am Main Germany, autor de correspondencia), Sirikorn Puangjit (Deutsche Bundesbank & Goethe University Frankfurt Frankfurt am Main Germany)
Año2026
Volumen73
Número3
Fecha de publicación2026-07-01
Peer ReviewedSí
Open AccessSí
TipoARTICLE
RevistaScottish Journal of Political Economy (JOURNAL)
Identificadores de la revistaISSN: 0036-9292 • E-ISSN: 1467-9485
EditorialWiley (PUBLISHER • GB)
DOI10.1111/sjpe.70061
OpenAlexW4416175817
IdiomaEN
Citas recibidas1
Referencias citadas36

Geopolitical risk (GPR) shocks that trigger the imposition of sanctions tend to lower output and raise inflation in the sanctioned country. We develop a three‐equation small open economy New Keynesian model where GPR shocks are modeled as negative productivity shocks and sanctions manifest as import tariffs in response to GPR increases. We calibrate the GPR process, sanction rule, and interest rate rule to match the observed dynamics of the GPR index, output, inflation, and the policy rate in Russian data. The sanction response to GPR allows the resulting model to capture the empirical impulse responses well. Additionally, we find that Russia's monetary policy rule is more accommodative than prescribed by the standard Taylor rule. Although this may reflect policy preferences, recent theoretical results indicate that such a policy stance may be optimal when sanctions act as cost‐push shocks that shift the Phillips Curve

Dynamic stochastic general equilibrium · Economic sanctions · Geopolitics · Impulse response · Inflation (cosmology) · Interest rate · Monetary policy · New Keynesian economics · Sanctions · Economic and Technological Developments in Russia · Economic Sanctions and International Relations · Russia and Soviet political economy