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The Impact of International Economic Sanctions on Trade An empirical Analysis

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  • Raul Caruso

    (Università Cattolica del Sacro Cuore di Milano)

Abstract

International economic sanctions appear to be a common and recurring feature of political interactions between states. In particular, the United States is the country which has most frequently applied negative economic sanctions after World War II. In a parallel way, several measures, imposed by a multilateral organisation like the United Nations have taken place in recent years. This paper provides, through a gravity model approach, an estimation of the impact of economic negative sanctions on international trade. First, the study reports panel gravity estimates of bilateral trade between the U.S. and 49 target countries over the period 1960-2000, inclusive. The results show that extensive and comprehensive sanctions have a large negative impact on bilateral trade, while this is not the case for limited and moderate sanctions. A second estimation focuses on the impact of unilateral U.S. sanctions on bilateral trade volume between target countries and the other G-7 countries over the same period. The results show that unilateral extensive sanctions have a large negative impact, while limited and moderate ones induce a slight positive effect on other G-7 countries bilateral trade. Thus, in the first case the hypothesis of negative ‘network effects’ is confirmed, while in the latter the sanctions- busting argument should be defended. In both estimations, however, multilateral sanctions demonstrate a large negative impact on trade flows.

Suggested Citation

  • Raul Caruso, 2003. "The Impact of International Economic Sanctions on Trade An empirical Analysis," International Trade 0306001, EconWPA.
  • Handle: RePEc:wpa:wuwpit:0306001
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    Cited by:

    1. Andreea-Emanuela Dragoi & Ana-Cristina Balgar, 2016. "Economic Sanctions against Russia. A Critical Evaluation," Knowledge Horizons - Economics, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 8(1), pages 63-67, March.
    2. 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.
    3. Raul Caruso, 2015. "Beyond deterrence and decline. Towards a general understanding of peace economics," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 128(1), pages 57-74.
    4. Jonas Frank, 2017. "The empirical consequences of trade sanctions for directly and indirectly affected countries," FIW Working Paper series 174, FIW.
    5. Rana Arslan Tariq, 2015. "Trade and Conflicts: Do Preferential Trade Agreements Matter?," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 21(4), pages 561-574, December.
    6. Dreger, Christian & Kholodilin, Konstantin A. & Ulbricht, Dirk & Fidrmuc, Jarko, 2016. "Between the hammer and the anvil: The impact of economic sanctions and oil prices on Russia’s ruble," Journal of Comparative Economics, Elsevier, vol. 44(2), pages 295-308.
    7. Brauer, Jurgen & Caruso, Raul, 2011. "Peace economists and peace economics," MPRA Paper 34927, University Library of Munich, Germany.
    8. Gabriel Felbermayr & Erdal Yalcin & Philipp Grübener, 2014. "Ökonomische Aspekte des Russlandkonfliktes: Ursachen, Kosten, Optionen," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 67(14), pages 35-43, July.
    9. Lorenzo Rotunno & Pierre-Louis Vézina, 2017. "Israel’s open-secret trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(2), pages 233-248, May.
    10. Matthieu Crozet & Julian Hinz, 2016. "Collateral Damage: The impact of the Russia sanctions on sanctioning countries’ exports," Working Papers 2016-16, CEPII research center.
    11. Kim Hyung Min, 2009. "Introducing the New Concept of National Power: From the Network Perspective," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 15(1), pages 1-15, May.
    12. Massoud Tansa G. & Magee Christopher S., 2012. "Trade and Political, Military, and Economic Relations," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 18(1), pages 1-39, May.
    13. Hinz, Julian, 2017. "The cost of sanctions: Estimating lost trade with gravity," Kiel Working Papers 2093, Kiel Institute for the World Economy (IfW).
    14. 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.
    15. Ioana M. PETRESCU, 2016. "The Effects of Economic Sanctions on the Informal Economy," Management Dynamics in the Knowledge Economy Journal, College of Management, National University of Political Studies and Public Administration, vol. 4(4), pages 623-648, December.
    16. Afesorgbor, Sylvanus Kwaku & Mahadevan, Renuka, 2016. "The Impact of Economic Sanctions on Income Inequality of Target States," World Development, Elsevier, vol. 83(C), pages 1-11.
    17. Jiawen Yang & Hossein Askari & John Forrer & Lili Zhu, 2009. "How Do US Economic Sanctions Affect EU's Trade with Target Countries?," The World Economy, Wiley Blackwell, vol. 32(8), pages 1223-1244, August.
    18. Crozet, Matthieu & Hinz, Julian, 2016. "Friendly fire - the trade impact of the Russia sanctions and counter-sanctions," Kiel Working Papers 2059, Kiel Institute for the World Economy (IfW).
    19. Firanchuk, Alexander, 2017. "Illegal Re-Export and Analysis of the Effectiveness of the Russian Food Embargo in 2014," Working Papers 041705, Russian Presidential Academy of National Economy and Public Administration.
    20. Salamat Ali & Richard Kneller & Chris Milner, 2017. "Market-specific trade costs and firm dynamics in Pakistan: Evaluating the US integrated cargo containers control programme," Discussion Papers 2017-02, University of Nottingham, GEP.
    21. Jinhwan Oh, 2011. "Does Economic Sanction Work? The Case of North Korea," ERSA conference papers ersa10p621, European Regional Science Association.
    22. Yeh Kuo-chun, 2009. "Will a Taiwan-China Monetary Union be Feasible? Lessons from Europe," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 14(3), pages 1-36, March.
    23. Brzoska Michael, 2008. "Measuring the Effectiveness of Arms Embargoes," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 14(2), pages 1-34, July.

    More about this item

    Keywords

    International negative sanctions; international trade; gravity model;

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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