Macroeconomic and Distributional Impact of Sanctions News: Evidence from Russia

66 Pages Posted: 22 Aug 2022 Last revised: 31 Oct 2024

See all articles by Mikhail Mamonov

Mikhail Mamonov

TBS Business School

Anna Pestova

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

Date Written: August 24, 2022

Abstract

How much do global sanctions harm the targeted economy? We introduce a novel instrumental variable approach that identifies the sanctions news shock by utilizing high-frequency trading data on Russia’s international sovereign bonds around the US sanctions announcements. First, we find that Russia’s country spread rises by 1.8--3 pp during the fourth and third days before, not during, announcements (information leakage). Second, output, consumption, and investment contract by 2.5%, 3.0%, and 5%, respectively---much larger effects than previously thought. Third, the most adversely affected groups are the largest and the most productive firms and the richest households. Unproductive firms and poorer households are barely affected by sanctions.

Keywords: Sanctions news shock, OFAC sanctions announcements, High-frequency identification, Sovereign bonds, Country Spread, Consumption, Income

JEL Classification: F51, E20, E30, E44, C26

Suggested Citation

Mamonov, Mikhail and Pestova, Anna, Macroeconomic and Distributional Impact of Sanctions News: Evidence from Russia (August 24, 2022). Available at SSRN: https://ssrn.com/abstract=4190655 or http://dx.doi.org/10.2139/ssrn.4190655

Mikhail Mamonov (Contact Author)

TBS Business School ( email )

Toulouse
France

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

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