Geopolitical risk has become a persistent feature of the global economic environment. Wars, rising military tensions, and acts of terrorism increasingly shape expectations in financial markets and influence the behaviour of firms and households (e.g. Balteanu et al. 2024, Coibin et al. 2025). Yet despite this growing importance, much of what we know about geopolitical risk is filtered through a narrow informational lens. Widely used measures rely on English-language media with global reach, potentially failing to sufficiently capture how risks are perceived everywhere. For small, open economies with distinctive histories and languages, this limitation may be particularly acute. In a recent paper (Ambrocio et al. 2025), we provide new evidence from Finland suggesting that understanding the domestic implications of geopolitical risk requires taking local perspectives seriously. Country-specific geopolitical risk viewed through local perceptions may have very different implications from measures that are better interpreted as global attention to local geopolitical risk.
Local perspectives versus global attention on local geopolitical risk
A central contribution of our analysis is to distinguish clearly between local perspectives on geopolitical risk and global attention to geopolitical risks associated with a given country. Local perspectives reflect how geopolitical events are interpreted and internalised by domestic audiences, shaping expectations, confidence, and economic behaviour at home. Global attention, by contrast, reflects how often a country appears in international news coverage in connection with geopolitical developments, which need not coincide with domestic perceptions of those risks.
Country-level geopolitical risk indices have typically been constructed from international English-language media by counting how frequently a specific country, or words associated with that country, appear alongside keywords related to geopolitical tensions. While this approach has proven useful for tracking global risk, it implicitly measures when a country attracts international attention rather than how geopolitical risk is perceived domestically. In this sense, country-specific indices based on English-language media are best interpreted as measures of global geopolitical attention (Caldara and Iacoviello 2022), whereas indices constructed from local-language news are closer to capturing domestic risk perceptions (Bondarenko et al. 2024, 2025, Alonso-Alvarez et al. 2025).
To move from attention to perception, we construct a Finnish geopolitical risk index (FinnGPR) based entirely on Finnish-language news from Yleisradio, the national public broadcaster. Trust in news media is exceptionally high in Finland and the media landscape is relatively concentrated, making this source a credible window into how geopolitical developments are framed for domestic audiences. The index follows the established keyword-based methodology used in the literature, translated and adapted to the Finnish context.1
A comparison of FinnGPR with existing indices is revealing. Figure 1 places the Finnish index alongside Global GPR, the global geopolitical risk index of Caldara and Iacoviello (2022), their Finland-specific index derived from English-language media (GPRC-FIN), and EA GPR, the euro area geopolitical risk index constructed by Bondarenko et al. (2024,2025). Two patterns stand out. First, FinnGPR closely tracks the global index, with common peaks around major international events such as terrorist attacks in Europe and Russia’s invasion of Ukraine. This suggests that Finnish perceptions of geopolitical risk largely move with global developments rather than reflecting narrowly domestic concerns.
Figure 1 Comparison of geopolitical risk indices
Notes: The figure plots the Finnish Geopolitical Risk Index (Finn GPR), the Caldara and Iacoviello (2022) index (Global GPR), and the GPR index for Finland from Caldara and Iacoviello (2022) based on English language foreign news media (GPRC-FIN) along with the Bondarenko et al. (2024, 2025) index for the Euro area (EA GPR).
Source: Authors’ calculations; Caldara and Iacoviello (2022); Bondarenko et al. (2024, 2025).
Second, and more strikingly, FinnGPR diverges sharply from the English-language Finland-specific index. Prior to Russia’s invasion of Ukraine, GPRC-FIN exhibits its most pronounced peak in mid-2018, coinciding with the Helsinki summit between the presidents of the US and Russia. From the perspective of global media, Finland briefly became geopolitically salient as a venue for great-power diplomacy. From the perspective of Finnish news coverage, however, this episode did not generate a comparable increase in perceived risk. By contrast, Russia’s invasion of Ukraine produces a sharp and sustained rise in FinnGPR – mirrored in broader global indices – underscoring that local media respond most strongly to events that materially alter Finland’s security environment.
These differences highlight why global attention should not be conflated with local risk perception. For small countries, English-language media tend to cover them episodically and instrumentally, often when they intersect with the interests of larger powers. Local media, by contrast, interpret and report on geopolitical developments through the lens of national history, geography, and institutions. Failing to account for this distinction can therefore lead to biased measures of geopolitical risks at the country level.
How geopolitical risk affects the Finnish economy
Using FinnGPR, we next examine how geopolitical risk shocks propagate through the Finnish economy. The existing literature documents sizeable negative effects of geopolitical risk on output, investment, and asset prices across many countries. Against this backdrop, Finland provides an instructive contrast.
Figure 2 illustrates the estimated impulse responses of key macroeconomic and financial variables to a one standard deviation increase in Finnish geopolitical risk perceptions. The real economy appears relatively resilient. Industrial production shows little reaction, unemployment rises only modestly, and inflation responds weakly. Stock returns decline, but by less than is typically reported in cross-country studies. Consumer confidence deteriorates, though the effect is moderate and short-lived.2
Figure 2 Macroeconomic and financial responses to geopolitical risk shocks
Notes: The figure plots cumulated impulse responses from lag-augmented local projections. All variables are standardised prior to estimation. The shaded area reflects 90% confidence intervals around the response to a Finnish geopolitical risk perceptions shock.
Source: Authors’ estimates.
The most pronounced response is observed in financial stress. Finland’s composite indicator of systemic stress rises significantly following a geopolitical risk shock, with effects that are both economically and statistically meaningful. This pattern suggests that while households and firms may be relatively insulated from geopolitical turbulence, Finland’s highly integrated financial markets transmit global risk more forcefully.
Several features of the Finnish context help explain this asymmetry. Finland’s long history of maintaining national defence readiness, combined with high trust in public institutions and strong social cohesion, may dampen the behavioural response of households to geopolitical news. Survey evidence consistently shows high confidence in the armed forces and a strong willingness to defend the country, likely reducing hasty responses to external threats.
At the same time, Finland is a small open economy deeply embedded in European and global financial markets. Asset prices, risk premia, and funding conditions therefore react quickly to shifts in global risk sentiment, helping to explain why financial stress responds more strongly than real activity. Moreover, when we compare responses to Finnish, euro area, and global geopolitical risk indices, consumer confidence reacts most strongly to euro area risk, suggesting that Finnish households interpret geopolitical developments through a broader European lens rather than a purely national one.
We also find that country-level geopolitical risk indices derived from English-language sources generate weaker and often insignificant responses for Finland. This reinforces the view that local perceptions, rather than external narratives, ultimately shape domestic economic outcomes.
Implications for policymakers and researchers
These findings carry clear implications. For policymakers, the key message is that grounding geopolitical risk assessment in local information and perceptions can provide a more accurate understanding of domestic vulnerabilities. Measures based solely on global media may misidentify the timing and intensity of risk as experienced by domestic agents. In Finland’s case, such measures would overstate the importance of events that attract international attention while understating risks that genuinely matter at home.
At the same time, the results underscore the need for vigilance in financial stability policy. Even when the real economy appears resilient, geopolitical shocks can amplify systemic stress through financial channels.
For researchers, the Finnish experience highlights the value of expanding geopolitical risk measurement beyond English-language sources. Local-language indices are not substitutes for global measures but complements that capture different dimensions of risk.
Taken together, Northern insights from Finnish media remind us that geopolitics is global in scope but local in perception. Measuring it accurately requires listening not only to the loudest voices in the global news cycle, but also to how risk is discussed at home.
Authors’ note: The views and opinions expressed in this article are the authors’ and do not necessarily reflect those of the Bank of Finland.
References
Alonso-Alvarez, I, M Diakonova and J J Perez (2025), “Rethinking GPR: The sources of geopolitical risk”, Banco de Espana Working Paper No. 2522.
Ambrocio, G, Z Fungáčová, J Heikkinen, E Kerola, I Korhonen and A Norring (2025), “Northern InSights: Geopolitical Risk from Finnish News Media”, Bank of Finland Research Discussion Paper No. 13/2025.
Caldara, D and M Iacoviello (2022), “Measuring geopolitical risk”, American Economic Review 112(4): 1194–1225.
Balteanu, I, M Bottone, A Fernández-Cerezo, D Ioannou, A Kutten, M Mancini and R Morris (2024), “European firms facing geopolitical risk: Evidence from recent Eurosystem surveys”, VoxEU.org, 18 May.
Bondarenko, Y, V Lewis, M Rottner and Y Schueler (2024), “Geopolitical risk perceptions”, Journal of International Economics 152.
Bondarenko, Y, V Lewis, M Rottner and Y Schueler (2025), “Geopolitical risk in the euro area”, VoxEU.org, 24 June.
Coibion, O, D Georgarakos, Y Gorodnichenko, G Kenny and J Meyer (2025), “Geopolitical risks and their implications for consumer expectations and spending”, VoxEU.org, 4 April.
