The Economic Effects of International Sanctions: An Event Study

28 Pages Posted: 9 Apr 2021

See all articles by Jerg Gutmann

Jerg Gutmann

University of Hamburg - Institute of Law and Economics

Matthias Neuenkirch

University of Trier - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Florian Neumeier

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Multiple version iconThere are 2 versions of this paper

Date Written: April 7, 2021

Abstract

Although international sanctions are a widely used instrument of coercion, their economic effects are still not fully understood. This study uses a novel dataset and an event study approach to evaluate the economic consequences of international sanctions, thereby accounting for pre-treatment dynamics in countries subject to sanctions. Our analysis focuses on the effects of sanctions on GDP growths as well as various transmission channels through which sanctions affect economic activity. We document a significant negative effect of international sanctions on GDP growth and its components (consumption, investment, and government expenditures) as well as on trade and foreign direct investment. Additional panel difference-in-differences estimations reveal that this detrimental effect is driven by financial sanctions and US unilateral sanctions.

Keywords: Economic growth, event study, international sanctions, transmission channels

JEL Classification: F43, F51, F52, F53, O43, O47

Suggested Citation

Gutmann, Jerg and Neuenkirch, Matthias and Neumeier, Florian, The Economic Effects of International Sanctions: An Event Study (April 7, 2021). Available at SSRN: https://ssrn.com/abstract=3821520 or http://dx.doi.org/10.2139/ssrn.3821520

Jerg Gutmann

University of Hamburg - Institute of Law and Economics ( email )

Johnsallee 35
Hamburg, 20148
Germany

Matthias Neuenkirch (Contact Author)

University of Trier - Faculty of Economics ( email )

Universit├Ątsring 15
Trier, 54296
Germany
+49 - (0)651 - 201 - 2629 (Phone)

HOME PAGE: http://www.uni-trier.de/index.php?id=50130

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Florian Neumeier

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

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