Cheap talk? Financial sanctions and non-financial firms

Tibor Besedes, Stefan Goldbach and Volker Nitsch

No 239, Darmstadt Discussion Papers in Economics from Darmstadt University of Technology, Department of Law and Economics

Abstract: Sanctions restrict cross-border interactions and therefore, not only put political and economic pressure on the target country, but also adversely affect the sender country. This paper examines the effect of financial sanctions on the country imposing them. We analyze the business responses of German non-financial entities to the imposition of sanctions on 23 countries over the period from 1999 through 2014. Examining highly disaggregated, monthly data from the German balance of payments statistics, we find four main results. First, German financial activities with sanctioned countries are reduced after the imposition of sanctions. Second, firms doing business with sanctioned countries tend to be disproportionately large, often having alternative business opportunities. Third, firms affected by sanctions expand their activities with non-sanctioned countries, some of which display close trade ties to the sanctioned country. Fourth, we find no effect of sanctions on broader measures of firm performance such as employment or total sales. Overall, we conclude that the economic costs of financial sanctions to the sender country are limited.

Keywords: sanction; restriction; cross-border transaction (search for similar items in EconPapers)
JEL-codes: F20 F36 F38 F51 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/232290/1/175206187X.pdf (application/pdf)

Related works:
Journal Article: Cheap talk? Financial sanctions and non-financial firms (2021)
Working Paper: Cheap talk? Financial sanctions and non-financial firms (2021)
Working Paper: Cheap Talk? Financial Sanctions and Non-Financial Firms (2021)
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:zbw:darddp:239

DOI: 10.26083/tuprints-00017631

Access Statistics for this paper

More papers in Darmstadt Discussion Papers in Economics from Darmstadt University of Technology, Department of Law and Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().