Finding this question pretty difficult, but here's a first attempt. Chatted with @SeanKucer about this all while making the forecast, so big thank you for his input!
"Base rate":
- Not so much a base rate as a base level of uncertainty - and much less thorough than @cafebedouin's work. Making a bunch of assumptions that wouldn't hold up to scrutiny (normality, no correlation between GPR data month-to-month, no overall trend, naïve assumption that my point estimate stays the same at 108), and doing some quick math using the GPR data since 1985, I get an 80% confidence interval starting at 66-151 for H2 2021, and increasing to a fairly substantial 5-212 for H1 2024.
GPR Methodology:
- The methodology for creating the GPR (link in the background info) involves tracking the number of articles in a selection of major Western, English-language newspapers that reference 6 specific factors, relative to the total number of articles.
- So the question isn't so much directly about geopolitical risk as it is about a proxy for risk - Western newspapers reporting on risk, war, and terrorism. This is important because a lot of topics go in and out of public dialogue despite continuing to simmer in the background. For example, coverage of race issues, Covid, etc, over the last year may have pushed stories of wars & terrorism out of newspapers, at least in a relative sense.
GPR Factors (a clearly non-exhaustive first look - would love to see what others come up with to add or remove from this list):
1. Geopolitical risk discussed explicitly and/or references to regional risks & US involvement
a. Afghanistan/Middle East seems the obvious item here - I expect August to show a substantial number of articles satisfying this criteria
b. Tensions with China, Iran, and North Korea have recently caused increases in the GPR and very easily could again, though I don't have particular near-term expectations for them
2. Nuclear Tensions
a. North Korea and Iran are the most likely causes of headlines here, with perhaps Russia thrown in for good measure - I remember some news bubbling up recently of Russia modernizing their nuclear arms
3. War Threats
a. China could be emboldened by the catastrophe in Afghanistan and there are a range of places that could see rumours or threats of war: Taiwan, India, SE Asia, Japan, and of course the U.S.
b. Ethiopia
c. Potential Venezuela civil war
4. Terrorist Threats
a. Afghanistan and the re-emergence of the Taliban, Al-Quaeda, and ISIS there are top of mind and likely generating headlines in the near-term
5. Coverage of ongoing wars
a. Yemen, Syria, Myanmar - none of these seem to be generating a tonne of news, but esp. if Covid coverage dies down or violence intensifies, they could
b. Afghanistan, again
6. Coverage of ongoing terrorism
a. The Wikipedia list of terrorist acts in 2021 seems fairly short, but this could always crop up again. Should establish a baseline for this, but haven't.
Near Term:
Afghanistan seems likely to dominate the news at least through August and into September with the potential of the US keeping troops there longer or failing to get all citizens out of the country. Throw in articles about ancillary issues like terrorist organizations setting up camp in the country, etc, and I could see the back half of 2021 bumping up the GPR considerably.
That said, the first 7 months average out to just 98, so the final 5 months will need to be pretty high to bring the average up very far.
Longer Term:
I think the ongoing trend toward a bi-polar geopolitical world with China continuing to rise could create an environment that allows for greater instability, so I'll give the GPR a generally upward trend though I don't have strong beliefs that any particular events will happen - just lots that could. Throw in articles discussing tensions or rivalry between the US & China, which I suspect could be the steady state for a few years, and I think you get close to the average from the Trump years which was circa 155.
The so-far disastrous pull-out from Afghanistan could embolden regional and other powers and thus also points the GPR in an upward direction, though perhaps I'm overstating the importance of that.
On the other hand, Covid or some similar non-war/terrorism topic could continue to dominate headlines and bring the GPR down.
Conclusion:
For now I'm forecasting a bump for H2 2021, relaxing a bit in H1 2022, then a gradual climb with a widening prediction interval (including a floor at about 33 for the low end of the band). Will watch for the monthly updates to the GPR to see if I'm getting the trend right at the moment.
Finding this question pretty difficult, but here's a first attempt. Chatted with @SeanKucer about this all while making the forecast, so big thank you for his input!
"Base rate":
- Not so much a base rate as a base level of uncertainty - and much less thorough than @cafebedouin's work. Making a bunch of assumptions that wouldn't hold up to scrutiny (normality, no correlation between GPR data month-to-month, no overall trend, naïve assumption that my point estimate stays the same at 108), and doing some quick math using the GPR data since 1985, I get an 80% confidence interval starting at 66-151 for H2 2021, and increasing to a fairly substantial 5-212 for H1 2024.
GPR Methodology:
- The methodology for creating the GPR (link in the background info) involves tracking the number of articles in a selection of major Western, English-language newspapers that reference 6 specific factors, relative to the total number of articles.
- So the question isn't so much directly about geopolitical risk as it is about a proxy for risk - Western newspapers reporting on risk, war, and terrorism. This is important because a lot of topics go in and out of public dialogue despite continuing to simmer in the background. For example, coverage of race issues, Covid, etc, over the last year may have pushed stories of wars & terrorism out of newspapers, at least in a relative sense.
GPR Factors (a clearly non-exhaustive first look - would love to see what others come up with to add or remove from this list):
1. Geopolitical risk discussed explicitly and/or references to regional risks & US involvement
a. Afghanistan/Middle East seems the obvious item here - I expect August to show a substantial number of articles satisfying this criteria
b. Tensions with China, Iran, and North Korea have recently caused increases in the GPR and very easily could again, though I don't have particular near-term expectations for them
2. Nuclear Tensions
a. North Korea and Iran are the most likely causes of headlines here, with perhaps Russia thrown in for good measure - I remember some news bubbling up recently of Russia modernizing their nuclear arms
3. War Threats
a. China could be emboldened by the catastrophe in Afghanistan and there are a range of places that could see rumours or threats of war: Taiwan, India, SE Asia, Japan, and of course the U.S.
b. Ethiopia
c. Potential Venezuela civil war
4. Terrorist Threats
a. Afghanistan and the re-emergence of the Taliban, Al-Quaeda, and ISIS there are top of mind and likely generating headlines in the near-term
5. Coverage of ongoing wars
a. Yemen, Syria, Myanmar - none of these seem to be generating a tonne of news, but esp. if Covid coverage dies down or violence intensifies, they could
b. Afghanistan, again
6. Coverage of ongoing terrorism
a. The Wikipedia list of terrorist acts in 2021 seems fairly short, but this could always crop up again. Should establish a baseline for this, but haven't.
Near Term:
Afghanistan seems likely to dominate the news at least through August and into September with the potential of the US keeping troops there longer or failing to get all citizens out of the country. Throw in articles about ancillary issues like terrorist organizations setting up camp in the country, etc, and I could see the back half of 2021 bumping up the GPR considerably.
That said, the first 7 months average out to just 98, so the final 5 months will need to be pretty high to bring the average up very far.
Longer Term:
I think the ongoing trend toward a bi-polar geopolitical world with China continuing to rise could create an environment that allows for greater instability, so I'll give the GPR a generally upward trend though I don't have strong beliefs that any particular events will happen - just lots that could. Throw in articles discussing tensions or rivalry between the US & China, which I suspect could be the steady state for a few years, and I think you get close to the average from the Trump years which was circa 155.
The so-far disastrous pull-out from Afghanistan could embolden regional and other powers and thus also points the GPR in an upward direction, though perhaps I'm overstating the importance of that.
On the other hand, Covid or some similar non-war/terrorism topic could continue to dominate headlines and bring the GPR down.
Conclusion:
For now I'm forecasting a bump for H2 2021, relaxing a bit in H1 2022, then a gradual climb with a widening prediction interval (including a floor at about 33 for the low end of the band). Will watch for the monthly updates to the GPR to see if I'm getting the trend right at the moment.