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Measuring Geopolitical Risk

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Measuring Geopolitical Risk

Federal Reserve Board,

5 min read
5 take-aways
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Geopolitical risk is everywhere in the global economy, but how to measure it?

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Business leaders, investors and monetary officials consider a variety of factors when developing their strategies. But it is geopolitical risk (GPR) that presents the greatest concern for these stakeholders, and a lack of measurement capacity and accuracy can stymie investment and trade. Economists Dario Caldara and Matteo Iacoviello have built an index that assesses the levels of GPR over time and explains how these perceived risks affect business and government decision making. getAbstract recommends this substantive report to executives, investors and policy experts for its detailed examination of a strategically significant hazard.


Geopolitical risk (GPR) is a primary component of public and private sector strategies. A 2017 Gallup survey indicated that 75% of investors see GPR as an even greater concern than “political and economic uncertainty.” However, researchers have not yet been able to comprehensively analyze the impacts of GPR on an economy. 

Simply put, GPR is “the risk associated with wars, terrorist acts and tensions between states that affect the normal and peaceful course of international relations.” Researchers...

About the Authors

Dario Caldara and Matteo Iacoviello are economists with the Board of Governors of the Federal Reserve System.

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