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International Economic Sanctions: Multipurpose Index Modelling in the Ukrainian Crisis Case

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  • Nady Rapelanoro
  • BALI Morad

Abstract

This short paper’s goal is to create a sanction index to simulate international economic sanctions. To do so, it has been decided to focus on the Ukrainian crisis case, and on international sanctions against the Russian Federation. The first part of this paper treats the methodology and mathematical formalization used to build our index. After the mathematical formalization comes an empirical part that is demonstrating improvements brought by our work. To assess these improvements, our index is compared to a previously developed index from Kholodilin and Netšunajev (2016). Four country SVAR models are used in two main sections, two initials and two extended. Results of this section reveal that our new sanction index has a stronger explanatory power. In addition, it seems that our index affects short-term Russian production variations more sharply than its predecessor. The explanatory power improvements are confirmed by extended models, confirming our index relevance.

Suggested Citation

  • Nady Rapelanoro & BALI Morad, 2020. "International Economic Sanctions: Multipurpose Index Modelling in the Ukrainian Crisis Case," EconomiX Working Papers 2020-8, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2020-8
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    References listed on IDEAS

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    1. Caruso Raul, 2003. "The Impact of International Economic Sanctions on Trade: An Empirical Analysis," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 9(2), pages 1-36, April.
    2. Christian Dreger & Jarko Fidrmuc & Konstantin Kholodilin & Dirk Ulbricht, 2015. "The Ruble between the Hammer and the Anvil: Oil Prices and Economic Sanctions," Discussion Papers of DIW Berlin 1488, DIW Berlin, German Institute for Economic Research.
    3. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    4. Christian Dreger & Konstantin Kholodilin, 2015. "The Ruble between the Hammer and the Anvil: The Impact of Oil Prices and Economic Sanctions," DIW Economic Bulletin, DIW Berlin, German Institute for Economic Research, vol. 5(44), pages 587-591.
    5. Robert C. Feenstra & James R. Markusen & Andrew K. Rose, 2001. "Using the gravity equation to differentiate among alternative theories of trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 34(2), pages 430-447, May.
    6. 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.
    7. Gary Clyde Hufbauer & Barbara Oegg, 2003. "The Impact of Economic Sanctions on US Trade: Andrew Rose's Gravity Model," Policy Briefs PB03-04, Peterson Institute for International Economics.
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    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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