Research Brief
Geopolitical Hybrid Threats
Rising geopolitical tensions are leading to an increase in hybrid threats such as cyberattacks, infrastructure sabotage, espionage, economic and political coercion, the spread of disinformation, and other forms of hybrid warfare. But how do these hybrid threats affect the economy and financial markets? To answer this question, we develop a new index that measures geopolitical hybrid threats and examine their macroeconomic and financial impact. We find that hybrid threats primarily suppress aggregate demand – through heightened uncertainty, weaker confidence, and tighter financial conditions. At the same time, they trigger policy responses, such as increased defence spending and monetary policy easing. These findings contrast with the predominantly supply-side effects of geopolitical risk documented in the literature.
| Norbert Metiu, Martin Völpel
