Giulia Lazzari
- 27 May 2026
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 1, 2026Details
- Abstract
- Recent geopolitical and geoeconomic events − including the war in the Middle East, with disruptions to oil and energy supplies amplifying uncertainty − have heightened risks to global growth, inflation and financial stability. This box evaluates the impact of geoeconomic risks on euro area financial stability using a new composite indicator that integrates geopolitical, trade and financial market dimensions. Estimates based on a quantile vector autoregression reveal that spikes in geoeconomic risks significantly dampen economic activity, exacerbate financial stress and weaken financial cycles. Persistent geoeconomic stress poses asymmetric downside risks to real GDP growth and financial stability, thus challenging macroeconomic conditions in the euro area.
- JEL Code
- F51 : International Economics→International Relations, National Security, and International Political Economy→International Conflicts, Negotiations, Sanctions
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G01 : Financial Economics→General→Financial Crises
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes