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What goes around comes around: The effects of sanctions on Swedish firms in the wake of the Ukraine crisis

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  • Joakim Gullstrand

Abstract

This study uses the sanctions imposed on and by Russia in 2014 as an exogenous shock on Swedish firms. The results suggest that the total short‐run cost of these sanctions on the Swedish economy amounted to around 1 billion SEK in 2013 prices, which implies a rather limited impact (around 0.025% of the Swedish GDP). The sanction effects were, however, highly asymmetric, and the direct effect on firms exporting banned products to Russia was a 70% drop in exports to Russia and an increased probability of exiting this market with 0.6 units. The indirect effects on nonbanned products were a 36% drop in sales and an increased probability of exiting of around 0.2 units. The disruption on the Russian market also created ripple effects outside this market, which was manifested in a 20% drop in the domestic production of banned products, a 12% drop in sales on markets outside Russia and a new export pattern. These negative ripple effects were also found to be pronounced in firms with their core products exposed to these sanctions, in firms with financial distress and in regions with a relatively low level of labour productivity.

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  • Joakim Gullstrand, 2020. "What goes around comes around: The effects of sanctions on Swedish firms in the wake of the Ukraine crisis," The World Economy, Wiley Blackwell, vol. 43(9), pages 2315-2342, September.
  • Handle: RePEc:bla:worlde:v:43:y:2020:i:9:p:2315-2342
    DOI: 10.1111/twec.13000
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    Cited by:

    1. Gutmann, Jerg & Neuenkirch, Matthias & Neumeier, Florian, 2022. "Do China and Russia Undermine US Sanctions? Evidence from DiD and Event Study Estimation," ILE Working Paper Series 64, University of Hamburg, Institute of Law and Economics.
    2. Gutmann, Jerg & Neuenkirch, Matthias & Neumeier, Florian, 2021. "The Economic Effects of International Sanctions: An Event Study," ILE Working Paper Series 49, University of Hamburg, Institute of Law and Economics.
    3. Drott, Constantin & Goldbach, Stefan & Nitsch, Volker, 2022. "The effects of sanctions on Russian banks in TARGET2 transactions data," Discussion Papers 38/2022, Deutsche Bundesbank.
    4. Besedeš, Tibor & Goldbach, Stefan & Nitsch, Volker, 2021. "Cheap talk? Financial sanctions and non-financial firms," European Economic Review, Elsevier, vol. 134(C).
    5. Gustavo de Souza & Naiyuan Hu & Haishi Li & Yuan Mei, 2022. "(Trade) War and Peace: How to Impose International Trade Sanctions," Working Paper Series WP 2022-49, Federal Reserve Bank of Chicago.
    6. 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.
    7. Besedeš, Tibor & Goldbach, Stefan & Nitsch, Volker, 2022. "Smart or smash? The effect of financial sanctions on trade in goods and services," Discussion Papers 28/2022, Deutsche Bundesbank.
    8. Davydov, Denis & Sihvonen, Jukka & Solanko, Laura, 2021. "Who cares about sanctions? Observations from annual reports of European firms," BOFIT Discussion Papers 5/2021, Bank of Finland, Institute for Economies in Transition.
    9. Davydov, Denis & Sihvonen, Jukka & Solanko, Laura, 2021. "Who cares about sanctions? Observations from annual reports of European firms," BOFIT Discussion Papers 5/2021, Bank of Finland Institute for Emerging Economies (BOFIT).
    10. repec:zbw:bofitp:2021_005 is not listed on IDEAS
    11. Crozet, Matthieu & Hinz, Julian & Stammann, Amrei & Wanner, Joschka, 2021. "Worth the pain? Firms’ exporting behaviour to countries under sanctions," European Economic Review, Elsevier, vol. 134(C).

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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
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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