Disentangling economic and energy policy uncertainties in German–Russian relations: A causality-based analysis in the aftermath of the 2022 Russo-Ukrainian war

Pirgaip, Burak and Karan, Mehmet Baha and Atici, Kazim Baris (2026) Disentangling economic and energy policy uncertainties in German–Russian relations: A causality-based analysis in the aftermath of the 2022 Russo-Ukrainian war. ACTA OECONOMICA, 76 (1). pp. 115-141. ISSN 0001-6373

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Abstract

As global power structures shift and energy security becomes increasingly politicized, tracing the cross-border transmission of uncertainty between economically and strategically linked nations has become crucial. This study investigates the dynamic interdependence of economic policy uncertainty (EPU) and energy-related uncertainty (EUI) between Germany and Russia over 2001–2023. We first examine bilateral linkages between the EPU and EUI indices using static and dynamic correlation measures. Standard and time-varying Granger causality tests reveal a persistent unidirectional influence from German to Russian EPU, while reverse causality remains weak. In the EUI domain, the causal structure is more volatile and bidirectional, with Russia influencing Germany before the 2022 Russo-Ukrainian War, but Germany becoming the dominant driver afterward. To isolate the role of energy in the transmission of policy uncertainty, we orthogonalize each country's EPU with respect to its own EUI. The results show that much of the bilateral EPU correlation is energy-driven; however, Germany's EPU component, unrelated to energy, still significantly affects Russian EPU in the post-war period. These findings highlight the strategic importance of energy policy in shaping macroeconomic uncertainty and highlight the need for its explicit integration into international economic policymaking.

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