The Federal Reserve’s Board of Governors released a March 21, 2025 note by Airaudo, de Soyres, Richards, and Santacreu that examines how different ways of measuring geopolitical distance affect assessments of trade and financial fragmentation. Using United Nations General Assembly roll‑call data, the authors estimate “ideal point” distances (IPDs) between countries under four specifications: a baseline 1946‑2023 measure, a 2023‑only measure, an economic‑vote‑only measure, and a post‑1990 measure. Regression results show that trade flows between countries in different geopolitical blocs fall by 11‑24 % after Russia’s 2022 invasion, with the strongest effect for the 2023 IPD. Economic‑vote IPDs yield a smaller effect (≈ 9 %) and the post‑1990 measure is similar to the baseline. Portfolio holdings display weaker, less consistent fragmentation. The analysis highlights the importance of methodological choices for policymakers studying global trade patterns. The note emphasizes that trade fragmentation remains evident across specifications, whereas portfolio holdings show more muted responses.
https://www.federalreserve.gov/econres/notes/feds-notes/fragmentation-revisiting-the-ideal-point-distance-measure-of-geopolitical-distance-20250321.html
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