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Financial Sanctions: Impact on Capital flows and GDP Growth in Russia

Author

Listed:
  • Prilepskiy, I.

    (Economic Expert Group, Moscow, Russia
    Financial Research Institute, Moscow, Russia)

Abstract

The article includes review of evolution of the Western nations' sanctions regime, the mechanisms of its impact on the Russian economy and the quantitative estimates of the effect on GDP. The sanctions' impact channel linked to their negative influence on gross and net capital inflow to Russia is studied. It emerges that this influence softened in 2016-2017 thanks to lower uncertainty and the economy's adaptation to sanctions, but increased again in 2018 on the background of the constant flow of new sanction threats from the USA. The negative impact of sanctions on the Russian GDP in 2014-2017 was substantially milder than that of lower oil prices and tended to decrease as the time passed. However, in 2018, this impact similarly increased as compared to 2016-2017. The abatement of the USA sanctions' pressure in early 2019 may lead to a smaller sanctions' growth effect; however, the risks of further widening of restrictive measures (which, in particular, could target energy projects of the Russian companies, as well as Russia's weapons exports), as the USA 2020 elections are approaching, remain substantial.

Suggested Citation

  • Prilepskiy, I., 2019. "Financial Sanctions: Impact on Capital flows and GDP Growth in Russia," Journal of the New Economic Association, New Economic Association, vol. 43(3), pages 163-172.
    • Handle: RePEc:nea:journl:y:2019:i:43:p:163-172
    DOI: 10.31737/2221-2264-2019-43-3-8
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    References listed on IDEAS

    as
    1. Dreger, Christian & Kholodilin, Konstantin A. & Ulbricht, Dirk & Fidrmuc, Jarko, 2016. "Between the hammer and the anvil: The impact of economic sanctions and oil prices on Russia’s ruble," Journal of Comparative Economics, Elsevier, vol. 44(2), pages 295-308.
    2. Konstantin A. Kholodilin & Aleksei Netsunajev, 2016. "Crimea and Punishment: The Impact of Sanctions on Russian and European Economies," Discussion Papers of DIW Berlin 1569, DIW Berlin, German Institute for Economic Research.
    3. Kholodilin, Konstantin A. & Netšunajev, Aleksei, 2019. "Crimea and punishment: the impact of sanctions on Russian economy and economies of the euro area," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 19(1), pages 39-51.
    4. E. Gurvich & I. Prilepskiy., 2016. "The impact of financial sanctions on the Russian economy," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
    5. Alexey I. Balaev & Evsey T. Gurvich & Ilya V. Prilepskiy & Alexandra L. Suslina, 2014. "Effect of Oil Price and Exchange Rate on the Fiscal Revenues," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 1, pages 5-16, March.
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    Cited by:

    1. Anastasia B. Likhacheva, 2021. "On the Strategic Effects of Unilateral Sanctions: Russian Experience," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 4, pages 52-66, August.

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    More about this item

    Keywords

    sanctions; balance of payments; capital flows; economic growth;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

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