Caldara and Iacoviello (2018) present a monthly geopolitical risk (GPR) index based on newspaper articles covering geopolitical tensions, examining its evolution and effects since 1985. The GPR index spikes during major geopolitical events such as the Gulf War, 9/11, the 2003 Iraq invasion, the 2014 Russia-Ukraine crisis, and the Paris terrorist attacks. High geopolitical risk is associated with reduced real activity, lower stock returns, and capital flows from emerging to advanced economies. The index is decomposed into threat and act components, with threats driving most adverse effects. Extending the index back to 1900, geopolitical risk was high during World Wars I and II, in the early 1980s, and has risen since the 21st century. The GPR index is constructed using newspaper articles from the U.S., UK, and Canada, and is audited to ensure accuracy. The index is compared to other measures of geopolitical risk and economic uncertainty, showing it captures events more exogenous to business cycles and capable of inducing financial volatility and policy uncertainty. The authors find that geopolitical risk reduces industrial production, employment, and trade, and lowers stock returns. They also find that geopolitical threats lead to prolonged uncertainty and persistent declines in real activity, while geopolitical acts have smaller effects. The GPR index is robust to media bias and is used to analyze its effects on the U.S. economy, showing that it influences macroeconomic variables and financial markets. The study highlights the importance of geopolitical risk in shaping economic and financial cycles, and provides a reliable measure for policymakers and investors.Caldara and Iacoviello (2018) present a monthly geopolitical risk (GPR) index based on newspaper articles covering geopolitical tensions, examining its evolution and effects since 1985. The GPR index spikes during major geopolitical events such as the Gulf War, 9/11, the 2003 Iraq invasion, the 2014 Russia-Ukraine crisis, and the Paris terrorist attacks. High geopolitical risk is associated with reduced real activity, lower stock returns, and capital flows from emerging to advanced economies. The index is decomposed into threat and act components, with threats driving most adverse effects. Extending the index back to 1900, geopolitical risk was high during World Wars I and II, in the early 1980s, and has risen since the 21st century. The GPR index is constructed using newspaper articles from the U.S., UK, and Canada, and is audited to ensure accuracy. The index is compared to other measures of geopolitical risk and economic uncertainty, showing it captures events more exogenous to business cycles and capable of inducing financial volatility and policy uncertainty. The authors find that geopolitical risk reduces industrial production, employment, and trade, and lowers stock returns. They also find that geopolitical threats lead to prolonged uncertainty and persistent declines in real activity, while geopolitical acts have smaller effects. The GPR index is robust to media bias and is used to analyze its effects on the U.S. economy, showing that it influences macroeconomic variables and financial markets. The study highlights the importance of geopolitical risk in shaping economic and financial cycles, and provides a reliable measure for policymakers and investors.