Economic sanctions serve as a foreign policy tool, but they can also hurt domestic firms doing business in the target country. This column looks at the effects of sanctions imposed by 37 countries on Russia over the conflict in Ukraine. The estimated loss of exports to Russia totalled $3.2 billion per month between December 2013 and June 2015. This loss was mostly incurred by European economies and in products not targeted by retaliations. French firm-level data points to a deterioration of trade finance services as the dominant mechanism.
Matthieu Crozet, Julian Hinz, 05 July 2016
John Armour, Colin Mayer, Andrea Polo, 24 March 2016
Following the Global Crisis, regulators around the world have shown a greater commitment to investigating and sanctioning corporate wrongdoers. This column argues that fines are only one (surprisingly small) component of the overall sanctions available to regulators. Reputational sanctions are, for some categories of misconduct, far more potent than direct penalties.
Yiqun Chen, Frank Sloan, 15 December 2014
Driving while intoxicated is a serious problem in the US. What policymakers disagree about is how best to discourage drunk driving. This column argues that the perceived risk for detection has a deterrent effect on drunk driving. Harsher sanctions do not convey the desired effect if the perceived risk for detection is low. The best policy thus should increase the probability of detection or manipulate peoples’ beliefs for such a risk.
Yong-Suk Lee, 06 November 2014
How does an autocratic regime domestically counter the impact of economic sanctions? This column studies the impact of sanctions on North Korea using satellite night-time lights data and finds that the burden of sanctions falls on the vulnerable population and not the elites in power towards whom the sanctions are aimed. Sanctions that fail to change the leader’s behaviour likely increase inequality at a cost to the already marginalised hinterlands.
Aasim Husain, Anna Ilyina, Li Zeng, 29 August 2014
The conflict in Ukraine and the sanctions against Russia have already affected the Russian financial markets. This column discusses the repercussions for the rest of Europe of possible disruptions in the trade and financial flows with Russia. Eastern European countries could be seriously affected by a slowdown in the Russian economy due to their close links with Russia. Western countries – despite having looser links with it – could also experience significant effects.
Peter van Bergeijk, 25 April 2014
In reaction to the Crimean crisis, the EU imposed certain sanctions on Russia. Russia responded by blacklisting EU and US officials. This column discusses the comparative vulnerability of the EU and Russia amid this tit for tat pattern. In purely economic terms, the EU is in a much better position than Russia. However, political regimes also matter. The autocracy score for Russia dampens the impact that the economic sanctions would have politically. The democratic nature of the European governments would translate the sanctions imposed by Russia into great political pressure for the EU. This makes the Russian tit for tat threat realistic.