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On wars, sanctions, and sovereign default

Javier Bianchi and Cesar Sosa-Padilla

Journal of Monetary Economics, 2024, vol. 141, issue C, 62-70

Abstract: This paper explores the role of restrictions on the use of international reserves as economic sanctions. We develop a simple model of the strategic game between a sanctioning (creditor) country and a sanctioned (debtor) country. We characterize how the sanctioning country should impose restrictions optimally, internalizing the geopolitical benefits and the potential losses of a default by the sanctioned country. A calibrated version of the model can account for the sequence of events leading to the Russian default. Moreover, it suggests that for every dollar of economic damage inflicted to Russia, the US is willing to give up 0.50 dollars of its own consumption.

Keywords: International sanctions; Sovereign default (search for similar items in EconPapers)
JEL-codes: E42 F32 F41 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: On Wars, Sanctions and Sovereign Default (2022) Downloads
Working Paper: On Wars, Sanctions and Sovereign Default (2022) Downloads
Working Paper: On Wars, Sanctions and Sovereign Default (2022) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:141:y:2024:i:c:p:62-70

DOI: 10.1016/j.jmoneco.2023.10.011

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