GEOPOLITICAL RISK AND ECONOMIC OUTCOMES IN SHADOW OF THE RUSSIA-UKRAINE WAR: PANEL ECONOMETRIC EVIDENCE FROM CENTRAL ASIAN ECONOMIES

This paper investigates the macroeconomic consequences of geopolitical risk (GPR) for five Central Asian economies — Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan, and Turkmenistan — in the context of the Russia–Ukraine war that escalated in February 2022. Employing a panel dataset spanning 2015Q1 to 2023Q4 and drawing on the Caldara and Iacoviello (2022) GPR index, we apply a panel Vector Autoregression (PVAR) framework augmented by fixed-effects estimation and dynamic GMM to identify the transmission channels through which geopolitical shocks propagate into real and financial outcomes. Our impulse response analysis reveals that a one-standarddeviation GPR shock reduces regional GDP growth by up to 0.61 percentage points at peak impact (three quarters post-shock), elevates inflation by approximately 0.48 percentage points, causes a significant depreciation of domestic currencies, and dampens foreign direct investment inflows.

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