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On Wars, Sanctions and Sovereign Default

Javier Bianchi and Cesar Sosa-Padilla

No 29989, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F3 F34 F41 F42 F51 (search for similar items in EconPapers)
Date: 2022-04
New Economics Papers: this item is included in nep-opm
Note: IFM
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Citations: View citations in EconPapers (5)

Published as Javier Bianchi & César Sosa-Padilla, 2023. "On wars, sanctions, and sovereign default," Journal of Monetary Economics, .

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Journal Article: On wars, sanctions, and sovereign default (2024) 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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