THE INFLUENCE OF THE RUSSIAN-UKRAINIAN CONFLICT ON THE EURO

Abstract

The beginning of the Russian-Ukrainian conflict, like any conflict of such proportions in the past, caused a significant disruption of international, financial, monetary and trade flows, primarily due to the sanctions imposed by the collective West on the Russian economy and the imposed ban on the import of energy, grains and other products of Russian origin. Although, based on analyzes and expectations, many Western economists and creators of the sanctions claimed that they will cause damage to the Russian economy, and they will not cause macroeconomic destabilization of the European economy, that is, they will only contribute to the reduction of export revenues in the Russian federal budget, and thus will indirectly imply the curtailment of the funds for financing the war and a quick end to it, but the sanctions caused the opposite effect as a rapid increase in the stock prices of oil, oil derivatives and basic grains was observed. The new situation on the world stock markets has a significant impact on a large number of countries, including the Eurozone, as an optimal currency area and an economy dependent on the import of Russian cheap energy, life and agricultural fertilizers, which according to a large number of studies are included in a crucial condition for rapid economic growth and maintenance of macroeconomic stability, to reduce with high inflation rates, budget deficit, growth of public borrowing and management of the euro in relation to the US dollar.
The focus of this paper is the historical overview of the change in the value of the euro in relation to the US dollar and the effect of the same on the flow of trade between the Eurozone and the USA as the largest trading partner and the identification and analysis of the key internal and external factors that caused the depreciation of the euro to the extent that in a certain period the US dollar is more expensive in relation to the euro, which further destabilizes macroeconomic parameters. Consequently, the paper provides an answer to the question related to the reflection of the Russian-Ukrainian conflict on the fall in the value of the euro and the significance of the transmission channels of the same within the international financial and trade system, with special reference on relations between the Eurozone and the USA.
The empirical research is conducted using secondary data from relevant institutions such as Eurostat and European commission reports, International Monetary Fund (IMF), World Bank and World Trade Organization (WTO). The research consists of descriptive statistics, correlation analysis and regression analysis using the method of ordinary least squares (OLS).