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Early phase success and long run failure of economic sanctions. With an application to Iran

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  • Dizaji, S.F.
  • van Bergeijk, P.A.G.

Abstract

We develop a model of the dynamics of economic sanctions in conjunction with the response of the sanction target. We apply this model to the case of the EU and US boycott of Iranian oil. Our VAR model finds significant impacts of sanctions both on key economic variables and on the political system. These effects, however, are limited in time and occur in the first two to four years of the sanction episode only because adjustment of economic structures mitigates the economic and political impact of the sanctions.

Suggested Citation

  • Dizaji, S.F. & van Bergeijk, P.A.G., 2012. "Early phase success and long run failure of economic sanctions. With an application to Iran," ISS Working Papers - General Series 544, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
  • Handle: RePEc:ems:euriss:32491
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    References listed on IDEAS

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    1. Kaemfer, William H & Lowenberg, Anton D, 1988. "The Theory of International Economic Sanctions: A Public Choice Approach," American Economic Review, American Economic Association, vol. 78(4), pages 786-793, September.
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    3. Hossein Askari & John Forrer & Hildy Teegen & Jiawen Yang, 2002. "Economic sanctions and US international business interests," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 55(220), pages 55-69.
    4. Fiona McGillivray & Allan C. Stam, 2004. "Political Institutions, Coercive Diplomacy, and the Duration of Economic Sanctions," Journal of Conflict Resolution, Peace Science Society (International), vol. 48(2), pages 154-172, April.
    5. van Bergeijk, Peter A. G. & van Marrewijk, Charles, 1995. "Why do sanctions need time to work? Adjustment, learning and anticipation," Economic Modelling, Elsevier, vol. 12(2), pages 75-86, April.
    6. Farzanegan, Mohammad Reza, 2011. "Oil revenue shocks and government spending behavior in Iran," Energy Economics, Elsevier, vol. 33(6), pages 1055-1069.
    7. Farzanegan, Mohammad Reza & Markwardt, Gunther, 2008. "The effects of oil price shocks on the Iranian economy," Dresden Discussion Paper Series in Economics 15/08, Technische Universit├Ąt Dresden, Faculty of Business and Economics, Department of Economics.
    8. Farzanegan, Mohammad Reza & Markwardt, Gunther, 2009. "The effects of oil price shocks on the Iranian economy," Energy Economics, Elsevier, pages 134-151.
    9. Gary Clyde Hufbauer & Jeffrey J. Schott & Kimberly Ann Elliott, 2009. "Economic Sanctions Reconsidered, 3rd Edition (paper)," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 4129.
    10. Gary Clyde Hufbauer & Jeffrey J. Schott & Kimberly Ann Elliott, 1990. "Economic Sanctions Reconsidered: 2nd Edition," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 82, January.
    11. Iwayemi, Akin & Fowowe, Babajide, 2011. "Impact of oil price shocks on selected macroeconomic variables in Nigeria," Energy Policy, Elsevier, vol. 39(2), pages 603-612, February.
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    Keywords

    Iran; sanctions; vector autoregressive model;

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