Geopolitical Risk Index - Measuring Global Political Uncertainty

Overview

The Geopolitical Risk (GPR) Index is a widely used measure that quantifies the level of geopolitical threats and events affecting economies and financial markets worldwide. Developed by economists Dario Caldara and Matteo Iacoviello at the Federal Reserve Board, the index is constructed by counting the occurrence of words related to geopolitical tensions in leading newspaper articles. It has become an essential tool for economists, investors, policymakers, and researchers seeking to understand how geopolitical uncertainty influences economic activity, investment decisions, and asset prices.

Summary of the GPR Index (matteoiacoviello.com/gpr.htm)

The GPR Index page maintained by Matteo Iacoviello serves as the primary hub for the Geopolitical Risk Index data and research. Here are the key details:

• Geopolitical Threats Index (GPRT): Captures escalating threats of adverse geopolitical events (e.g., war threats, nuclear tensions)
• Geopolitical Acts Index (GPRA): Captures the realization of adverse geopolitical events (e.g., actual wars, terrorist attacks)

• Spikes in the GPR Index correspond to well-known geopolitical events: the two World Wars, the Korean War, the Cuban Missile Crisis, the Vietnam War, the Gulf War, the September 11 attacks, the Iraq War, the Crimea annexation, and the Russia-Ukraine conflict
• Increases in geopolitical risk lead to declines in investment, employment, and stock market returns
• Geopolitical risk shocks have persistent negative effects on economic activity
• The threat component of geopolitical risk is a significant driver of economic fluctuations

Top 4 Recommended Resources

1. Matteo Iacoviello's GPR Index Page

• Primary source for the GPR Index data with free downloads
• Regularly updated with the latest monthly readings
• Provides both the aggregate index and sub-indices (threats vs. acts)
• Includes country-specific GPR indices
• Links to the foundational academic paper

2. Caldara and Iacoviello (2022) - "Measuring Geopolitical Risk" (American Economic Review)

• Peer-reviewed and published in a top-tier economics journal
• Rigorous description of the text-analysis methodology
• Comprehensive empirical evidence on the economic effects of geopolitical risk
• Establishes the GPR Index as a valid and reliable measure through extensive robustness checks

3. Federal Reserve Board - FEDS Notes on Geopolitical Risk

• Authoritative source from the U.S. Federal Reserve
• Accessible writing for non-specialist audiences
• Places geopolitical risk in the context of monetary policy and financial stability
• Includes clear visualizations and charts

4. BlackRock Geopolitical Risk Indicator (BGRI)

• Interactive dashboard with real-time risk assessments
• Focuses on market-relevant geopolitical scenarios
• Provides both risk level and market attention metrics
• Practical orientation for investment decision-making

My Recommendation

For anyone researching the Geopolitical Risk Index, start with Matteo Iacoviello's GPR page to access the data and understand the index at a high level. Then read the American Economic Review paper for the full academic treatment of the methodology and findings. The Federal Reserve FEDS Note is ideal if you need a concise, policy-focused summary. Finally, the BlackRock dashboard is useful for those interested in the investment implications of geopolitical risk. Together, these resources provide a comprehensive understanding of how geopolitical risk is measured, its historical patterns, and its real-world economic and financial impact.