Working Papers

Trade under Tensions: Insights from Media-Reported Bilateral Events

with M. Crozet (U. Paris-Saclay, CEPII), C. Emlinger (CEPII), and D. Mirza (U. Tours)

Abstract: A growing number of studies show the significant impact of major geopolitical events and

alignments between countries on international trade. We propose a new dataset, based on

the GDELT database, that captures the exposure of country pairs to all types of geopolitical

frictions, including low- and medium-importance events. The statistical indicators, which

are monthly and bilateral, provide information on the geopolitical climate surrounding the

relations between each country pair over time. The database covers 201 countries over

nearly 10 years. Our econometric analysis confirms that geopolitical tensions create an

unfavorable climate for international trade. We estimate that an increase of one standard

deviation in our tension indicator has an effect on trade equivalent to a tariff ranging from

0.06% to 8.19%, depending on the specification. We also observe that the sensitivity of

international trade to geopolitical events has increased significantly since the COVID-19

crisis.

Keywords: Geoeconomics, International Trade, Risk, GDELT