You’re banned! The effect of sanctions on German cross-border financial flows

Tibor Besedes, Stefan Goldbach and Volker Nitsch

Economic Policy, 2017, vol. 32, issue 90, 263-318

Abstract: Summary This paper examines the effect of financial sanctions on cross-border capital flows. While sanctions can be expected to hinder international transactions, thereby putting political and economic pressure on a target country, we study the patterns of adjustment in bilateral financial relationships after the imposition of sanctions along various dimensions. Our analysis is based on highly disaggregated, monthly data from the German balance of payments statistics for the period from 2005 through 2014. During this time, Germany imposed financial sanctions on 20 countries; two of these sanctions have been lifted. Applying a differences-in-differences approach, we find two key results. First, financial sanctions have a strong and immediate negative effect on direct financial flows with the sanctioned country, with cross-border flows reduced in either direction. Second, sanctions imposed by the European Union alone, and therefore only enforced by their member countries instead of the United Nations, are evaded as flows with major trading partners of sanctioned countries increase. We conclude that financial sanctions do matter for capital flows.

JEL-codes: F20 F36 F38 F51 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
http://hdl.handle.net/10.1093/epolic/eix001 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: You’re banned! The effect of sanctions on German cross-border financial flows (2017)
Working Paper: You're banned! the effect of sanctions on German cross-border financial flows (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:ecpoli:v:32:y:2017:i:90:p:263-318.

Access Statistics for this article

Economic Policy is currently edited by Ghazala Azmat, Roberto Galbiati, Isabelle Mejean and Moritz Schularick

More articles in Economic Policy from CEPR, CESifo, Sciences Po Contact information at EDIRC., CES Contact information at EDIRC., MSH Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().