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Smart or smash? The effect of financial sanctions on trade in goods and services

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  • Besedeés, Tibor
  • Goldbach, Stefan
  • Nitsch, Volker

Abstract

We examine the extent to which financial sanctions imposed by Germany through its European Union and United Nations commitments cause collateral damage on Germany's trade in goods and services. Financial sanctions reduce Germany's inflows and outflows of financial assets, as well as imports and exports of goods and services. The relative effects on trade in goods and services are weaker than on financial assets, about half as large in the case of goods and two-thirds as large in the case of services. The effect on trade in goods is entirely due to episodes where financial sanctions are accompanied by export restrictions of specific goods. In the case of services trade, only exports are affected by financial sanctions once export restrictions are considered. The primary channel through which sanctions affect the three types of cross-border flows is the extensive margin. Anticipation effects are quite strong for financial assets and weak for services and goods.

Suggested Citation

  • Besedeés, Tibor & Goldbach, Stefan & Nitsch, Volker, 2023. "Smart or smash? The effect of financial sanctions on trade in goods and services," Darmstadt Discussion Papers in Economics 244, Darmstadt University of Technology, Department of Law and Economics.
    • Handle: RePEc:zbw:darddp:244
    DOI: 10.26083/tuprints-00024478
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    Cited by:

    1. Ina C. Jäkel & Søren Østervig & Erdal Yalcin, 2022. "The Effects of Heterogeneous Sanctions on Exporting Firms —Evidence from Denmark," CESifo Working Paper Series 10086, CESifo.
    2. Anirudh Shingal, 2023. "Sanctions and services trade: the neglected dimension," RSCAS Working Papers 2023/39, European University Institute.

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    More about this item

    Keywords

    sanction; restriction; cross-border transaction; trade in goods; trade in services; financial flows;
    All these keywords.

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls

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