The Negative Impact of the Ukraine War on the US Economy

Author(s): Marzieh Ronaghi, Eric Scorsone

Russia's invasion of Ukraine has caused various political, humanitarian and economic crises around the world, and the economic consequences are now observed in the US, especially at gas stations. If the war continues, the United States will be prepared to resolve supply chain disruptions and limited resources (e.g. Wheat, oil, and natural gas) that could increase high inflation. The present study investigates the effects of the Russian war on the US economy using the three methods of Granger causality, Static and System of equations simultaneously with the aim of showing which of these three different approaches has a significant relationship with inflation and shows that both in the long-term (12 years) and in the short-term period, the relationship between gas price increase and inflation is emphasized. In the first two methods, Granger causality test and static test, in which the variable of number of corona patients, was included, showed that there is a significant relationship between the number of corona patients and the amount of carbon dioxide emissions; However, some results obtained in static and sure methods were different from the results of the Granger causality test. The research recommends that policymakers need to develop energy policies by considering the persistence of oil and gas prices on economic performance. In order to reduce the persistence of oil and gas price shocks on economic growth, the United States should use alternative energy sources for the long-term performance of its macroeconomics.