Crimea and Punishment: The Impact of Sanctions on Russian and European Economies

18 Pages Posted: 25 Apr 2016

See all articles by Konstantin A. Kholodilin

Konstantin A. Kholodilin

German Institute for Economic Research (DIW Berlin)

Aleksei Netsunajev

Free University of Berlin (FUB)

Date Written: April 1, 2016

Abstract

The conflict between Russia and Ukraine that started in March 2014 resulted in bilateral economic sanctions imposed by Russia and Western countries, including the members of the euro area (EA). The paper investigates the impact of sanctions on the real side of the economy of Russia and the EA. Using an index that measures intensity of sanctions the effects of sanctions shocks are analyzed by the means of structural vector autoregression. The direct effect on GDP growth is documented for Russia but not for the EA. While, on average, 1.97% of the GDP quarter-on-quarter growth is estimated to be lost due to sanctions by Russia, the corresponding estimate for the aggregate EA is very small. On the contrary, the indirect effect through depreciation of the currency is shown to be more important for the EA.

Keywords: Political conflict, sanctions, economic growth, Russia, euro area, structural vector autoregression

JEL Classification: C32, F51

Suggested Citation

Kholodilin, Konstantin A. and Netsunajev, Aleksei, Crimea and Punishment: The Impact of Sanctions on Russian and European Economies (April 1, 2016). DIW Berlin Discussion Paper No. 1569, Available at SSRN: https://ssrn.com/abstract=2768622 or http://dx.doi.org/10.2139/ssrn.2768622

Konstantin A. Kholodilin (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

Aleksei Netsunajev

Free University of Berlin (FUB) ( email )

Van't-Hoff-Str. 8
Berlin, Berlin 14195
Germany

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