The Impact of International Economic Sanctions on Trade - an Empirical Analysis

29 Pages Posted: 10 Apr 2006

See all articles by Raul Caruso

Raul Caruso

Catholic University of the Sacred Heart of Milan

Date Written: 2003

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.

Keywords: International negative sanctions, international trade, gravity model

JEL Classification: F13, D74, C33

Suggested Citation

Caruso, Raul, The Impact of International Economic Sanctions on Trade - an Empirical Analysis (2003). Available at SSRN: https://ssrn.com/abstract=895841 or http://dx.doi.org/10.2139/ssrn.895841

Raul Caruso (Contact Author)

Catholic University of the Sacred Heart of Milan ( email )

20123 Milano
Italy

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