The impact of financial sanctions on countries' participation in global value chains: An assessment with the synthetic control method

I. Drapkin, Yu. Simachev, A. Fedyunina and P. Pastukhova
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I. Drapkin: Ural Federal University named after the first President of Russia B.N. Yeltsin, Yekaterinburg, Moscow, Russia
Yu. Simachev: National Research University "Higher School of Economics" (HSE University), Moscow, Russia
A. Fedyunina: National Research University "Higher School of Economics" (HSE University), Moscow, Russia
P. Pastukhova: Ural Federal University named after the first President of Russia B.N. Yeltsin, Yekaterinburg

Journal of the New Economic Association, 2025, vol. 69, issue 4, 151-172

Abstract: In recent years, the significant increase in the application of international sanctions has sparked interest in evaluating their effects. This study analyzes the impact of UN financial sanctions on countries' participation in global value chains (GVCs). The research uses the synthetic control method to assess countries subjected to financial sanctions between 1995 and 2020. Nine developing economies are considered, along with the specific case of sanctions against Russia in 2014. The results show that financial sanctions do not always lead to a reduction in countries' participation in GVCs. The effects of sanctions are heterogeneous: they more often influence direct participation by reducing raw material exports than reverse participation by decreasing imports. The impact of sanctions also varies depending on the time horizon (3, 5, 7 years) and the specific country. It was found that the negative effects of sanctions may only appear in the medium term and may dissipate after seven years, after which a country's development is determined by other factors. The findings are important for the policy of countries under financial sanctions. We conclude that the role of the state and its policies is a key factor in mitigating the negative effects of sanctions during the adaptation period and neutralizing them in the long term.

Keywords: sanctions; financial sanctions; global value chains; synthetic control method; international trade; foreign direct investment; government policy (search for similar items in EconPapers)
JEL-codes: F13 F51 O24 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:nea:journl:y:2025:i:69:p:151-172

DOI: 10.31737/22212264_2025_4_151-172

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