NEW PUBLICATION: This paper constructs a new identification method to quantify bilateral geopolitical shocks—geopolitical turning points—i.e., abrupt, unforeseen state-to-state political turning points. Geopolitical shocks are captured by the second difference of the Political Relationship Index (Δ²PRI), a monthly narrative-based index constructed from Chinese government and media coverage. Unlike conventional global geopolitical risk indicators, Δ²PRI separates sudden departures from bilateral diplomatic paths so causal estimation is possible in a comparative cross-national context. Quantile instrumental variable local projections (IV-LP) are applied in the paper to estimate the dynamic and asymmetric geopolitical shock impact on world oil prices. It is estimated that US–China relational improvements lower oil prices by 0.2% in the short run and increase them by 0.3% in the medium run, with larger effects at the distribution boundaries of oil prices. Replication from Japan–China data establishes external validity. The paper adds a replicable analysis framework to explain how political shocks for dyads with heterogeneous institutional history and strategic rivalry spill over into global economic instability.
You can find the preprint version, the abstract, the keywords, and the online appendix in an older post:
You can quote this article as:
Saadaoui, J. (2026). Geopolitical Turning Points and Macroeconomic Volatility: A Bilateral Identification Strategy. Journal of Comparative Economics, forthcoming.
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[…] In three previous posts on the use of Geopolitical Turning Points as instruments for bilateral geopolitical relation, I presented the working paper, the underlying logic of the instrument, and the announcement of the publication in the Journal of Comparative Economics. […]