Crime and Punishment? Anticipation, Diffusion, and Propagation of Global Sanctions

93 Pages Posted: 11 Jul 2022 Last revised: 15 Jan 2025

See all articles by Steven Ongena

Steven Ongena

University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

Anna Pestova

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences

Mikhail Mamonov

TBS Business School

Date Written: June 25, 2022

Abstract

Global sanctions are increasingly used to limit authoritarian regimes worldwide. Using Russia and its banking industry in 2014--2020 as a laboratory, we find that staggered sanctions announcements produce unintended anticipation effects among targeted but not-yet-sanctioned state-controlled banks by spurring them to increase international borrowings and sell foreign asset holdings before freezing. The uncertainty associated with staggered sanctions also produces diffusion effects on non-targeted private banks with political ties, defined through board connections or regional presence. Targeted banks preemptively cut loan supply by at least 20%, but negative real effects occur only when they lend to firms under concurrent sanctions.

Keywords: Political connections, Staggered policy implementation, International borrowings, Foreign asset holdings, Difference in differences, Aggregate real effects

JEL Classification: F51, G41, H81, L25

Suggested Citation

Ongena, Steven R. G. and Pestova, Anna and Mamonov, Mikhail,
Crime and Punishment? Anticipation, Diffusion, and Propagation of Global Sanctions
(June 25, 2022). Swiss Finance Institute Research Paper No. 23-59, Available at SSRN: https://ssrn.com/abstract=4146432 or http://dx.doi.org/10.2139/ssrn.4146432

Steven R. G. Ongena

University of Zurich - Department Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

NTNU Business School ( email )

Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Anna Pestova

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences ( email )

Politickych veznu 7
Prague, 111 21
Czech Republic

Mikhail Mamonov (Contact Author)

TBS Business School ( email )

Toulouse
France

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