The Asymmetric Economic Effects of COVID-19 and the Russia–Ukraine War: Panel Evidence from G7 & BRICS+ (1970–2024)

This research looks at how COVID-19 and the Russia-Ukraine war differently impact the GDP growth rates of BRICS + and G7 countries, using a strong panel ECM model that accounts for connections between countries, from 1970 to 2024. Diagnostic tests show that the countries are linked and have significant errors in their data, which is why Diagnostic tests confirm cointegration and significant cross-country error correlation, hence the necessity for PCSEs. The results indicate a rapid error correction speed of 81.5% annually, underlining rapid adjustment to long-run equilibrium. We find strong evidence of conditional convergence, where poorer economies tend to grow faster in the longer run. The shock caused by the COVID-19 pandemic contributed a − 5.8 percentage point decline to annual growth, implying a sharp and simultaneous contraction of the global economy. In comparison to the above, the shock from the Russia-Ukraine conflict had a marginally positive and differential impact (insignificant), suggesting that it favoured export-oriented countries while harming import-dependent countries. The growth of investment becomes evident as the most significant short-term engine behind growth, while government spending growth shows crowding-out effects, indicating that increased investment is driving economic recovery more effectively than government spending in the current context. It is critical to note that trade openness becomes insignificant when accounting for cross-sectional dependency, refuting widely recognized paradigms on growth benefits from globalization. According to the study, sustainable growth, as well as the ability to overcome a crisis, is only achievable through strategic investment in education and green energy, the establishment of contingent fiscal buffers, support for a good governance environment (stable government), and improvement of global coordination regarding asymmetric shocks. Methodologically, we demonstrate that accounting for cross-country dependence has a significant impact on inference regarding growth determinants and provides a clearer foundation for making economic policies in a world economy in a future study.