How can we measure political risk when we can’t measure political risk?

A Martin Wolf column in the Financial Times earlier this month discusses how political risk, and political developments more generally, are impacting global markets. It’s a good article, but one odd item jumped out at me.

At the end of the article, Wolf includes a chart of the Geopolitical Risk (GPR) index, developed by Dario Caldara and Matteo Iacoviello, both economists at the Federal Reserve (more info in the paper “Measuring Geopolitical Risk” by Dario Caldara and Matteo Iacoviello at https://www2.bc.edu/matteo-iacoviello/gpr.htm).

Political Risk, EconomicsChris OatesMay 1, 2020political risk theory, political risk metrics