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Long-Run Consequences of Sanctions on Russia

Author

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  • David Baqaee
  • Hannes Malmberg

Abstract

We analyze the long-run economic consequences of Western sanctions on Russia. Using a new framework for balanced growth path analysis, we find that allowing for capital adjustment amplifies consumption loss due to sanctions, contrary to the intuition that long-run effects should be milder due to greater adjustment opportunities. When capital can adjust, consumption declines are 1.4 times larger for Russia and 2.2 times larger for Eastern Europe compared to static models with fixed capital. Given a trade elasticity of four, long-run consumption falls by 8.5 percent in Russia and 2 percent in Eastern Europe. Western countries experience mild effects regardless.

Suggested Citation

  • David Baqaee & Hannes Malmberg, 2025. "Long-Run Consequences of Sanctions on Russia," AEA Papers and Proceedings, American Economic Association, vol. 115, pages 583-587, May.
    • Handle: RePEc:aea:apandp:v:115:y:2025:p:583-87
    DOI: 10.1257/pandp.20251087
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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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