"Crime and Punishment"? Anticipation, Diffusion, and Propagation of Global Sanctions

Mikhail Mamonov, Steven Ongena and Anna Pestova

No 16075, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Global sanctions are increasingly used to limit authoritarian regimes worldwide. Using Russia and its banking industry in 2014-2020 as a laboratory, we fi nd that staggered sanctions announcements produce unintended anticipation effects among targeted but not-yet-sanctioned state-controlled banks by spurring them to increase international borrowings and sell foreign asset holdings before freezing. The uncertainty associated with staggered sanctions also produces diffusion effects on non-targeted private banks with political ties defined through board connections or regional presence. Targeted banks preemptively cut loan supply by at least 20%, but negative real effects occur only when they lend to firms under concurrent sanctions.

Keywords: Banks; Financial sanctions; Political influence; International borrowings; Foreign assets; Informational effects of sanctions; Treatment diffusion (search for similar items in EconPapers)
JEL-codes: E65 F34 G21 G41 H81 (search for similar items in EconPapers)
Date: 2021-04
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