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Crimea and punishment: the impact of sanctions on Russian economy and economies of the euro area

Author

Listed:
  • Konstantin A. Kholodilin

    (DIW Berlin, Berlin, Germany and Higher School of Economics, National Research University, St. Petersburg, Russia)

  • Aleksei Netsunajev

    (Elisa Eesti AS and Tallinn University of Technology, Tallinn, Estonia)

Abstract

The conflict between Russia and Ukraine that started in March 2014 led Western countries and Russia to impose economic sanctions on each other, including the euro zone members. The paper investigates the impact of the sanctions on the real side of the economies of Russia and the euro area. The effects of sanctions are analyzed with a structural vector autoregression. To pin down the effect we are interested in, we include an index that measures the intensity of the sanctions in the model. The sanction shock is identified and separated from the oil price shock by narrative sign restrictions. We find weak evidence that Russian and euro area GDPs declined as a result of the sanctions. The effects of the sanctions are also small for the real effective exchange rate.

Suggested Citation

  • Konstantin A. Kholodilin & Aleksei Netsunajev, 2019. "Crimea and punishment: the impact of sanctions on Russian economy and economies of the euro area," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 19(1), pages 39-51.
    • Handle: RePEc:bic:journl:v:19:y:2019:i:1:p:39-51
    DOI: 10.1080/1406099X.2018.1547566
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

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