The Economic Effects of International Sanctions: An Event Study

Jerg Gutmann, Matthias Neuenkirch and Florian Neumeier ()

No 2021-03, Research Papers in Economics from University of Trier, Department of Economics

Abstract: Although international sanctions are a widely used instrument of coercion, their economic effects are still not well-understood. This study uses a novel dataset and an event study approach to evaluate the economic consequences of international sanctions, thereby visualizing pre-treatment and treatment dynamics in countries subject to sanctions. Our analysis focuses on the effects of sanctions on GDP growth as well as on various transmission channels through which sanctions suppress economic activity. We document a significant negative effect of sanctions on the growth rate of GDP and its components (consumption and investment) as well as on trade and foreign direct investment. Given that sanctions exert their adverse effect over the first years of a sanction episode and that sanctioned countries fail to recover during or immediately after the episode, we demonstrate the usefulness of sanctions as a political instrument of coercion. Long-lasting sanctions regimes, however, may not provide the political incentives needed to force additional concessions.

Keywords: Economic growth; event study; foreign influence; international sanctions; transmission channels (search for similar items in EconPapers)
JEL-codes: F43 F51 F52 F53 G28 K33 O19 O43 O47 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2021
New Economics Papers: this item is included in nep-gro and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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http://www.uni-trier.de/fileadmin/fb4/prof/VWL/EWF/Research_Papers/2021-03.pdf Third version, 2021 (application/pdf)

Related works:
Journal Article: The economic effects of international sanctions: An event study (2023)
Working Paper: The Economic Effects of International Sanctions: An Event Study (2021)
Working Paper: The Economic Effects of International Sanctions: An Event Study (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:trr:wpaper:202103

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