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From Imposition to Lifting: Estimating the Effects of Sanctions Over Their Lifecycle

Author

Listed:
  • Ohyun Kwon

    (School of Economics, Drexel University)

  • Arne Nagengast

    (Deutsche Bundesbank)

  • Jangsu Yoon

    (Department of Economics, University of Kentucky)

  • Yoto Yotov

    (School of Economics, Drexel University)

Abstract

We combine the latest difference-in-differences estimators for treatments with exit and structural gravity literature to evaluate the effects of sanctions on trade, when they are in place and when they are lifted. Our analysis shows that sanctions reduce trade between senders and targets by 58%, with estimates from our preferred model 50% larger than those from traditional two-way fixed effects (TWFE) models. A bias decomposition highlights arbitrary weighting and contamination bias in TWFE estimates. Sensitivity checks confirm the robustness of our findings, emphasizing the relevance of these methods for gravity estimations, including trade, migration, foreign investment, and other bilateral flows.

Suggested Citation

  • Ohyun Kwon & Arne Nagengast & Jangsu Yoon & Yoto Yotov, 2026. "From Imposition to Lifting: Estimating the Effects of Sanctions Over Their Lifecycle," Working Papers 202606, Center for Global Policy Analysis, LeBow College of Business, Drexel University.
    • Handle: RePEc:drx:wpaper:202606
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    File URL: https://www.lebow.drexel.edu/sites/default/files/2026-02/cgpa_from_imposition-lifting-2026_06.pdf
    File Function: First version, 2026
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    Keywords

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    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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