The impact of economic sanctions on international trade: How do threatened sanctions compare with imposed sanctions?

We draw on established theoretical works in international political economy to compare the empirical effect of threatened and imposed economic sanctions on international trade. To deepen the analysis, we analyze whether there are any differential effects when different instruments of sanctions are employed, as well as whether the effect of sanctions is product specific. To do this, we use the gravity model and recent detailed disaggregated data on sanctions spanning the period 1960–2009. Our results show that the impact of threatened sanctions differs qualitatively and quantitatively from imposed sanctions. Whereas imposed sanctions lead to a decrease in the trade flow between the sender and its target, a threat of sanctions leads to an increase. The positive impact of the threat may be due to economic agents in both the sender and its target resorting to stockpiling prior to the actual imposition of sanctions to minimize any adverse consequences of the sanctions. These differential effects of threatened and imposed sanctions also extend to food and medicinal products, as well as when different instruments of sanctions are employed.     

The effects of tariffs on coalition formation in a dynamic global warming game

The prospects for cooperation on climate protection beyond 2012 are currently uncertain. Thus policy instruments which foster participation in International Environmental Agreements (IEA) are in demand. Among the instruments under discussion are trade sanctions. Multi-region optimal growth models are a state of the art tool for integrated assessment, but introducing trade sanctions distorts the competitive equilibrium, making it difficult to compute numerically. We introduce trade and trade sanctions into a model of coalition stability to assess the potential of trade sanctions to support an IEA. Trade is modeled by having all countries produce a generic output good, but adopting national product differentiation (Armington assumption). Coalitions are free to impose tariffs on imports from non-cooperating countries. We solve the model numerically using a refined version of Negishi's [Negishi, T., 1960. Welfare economics and existence of an equilibrium for a competitive economy. Metroeconomica 12, 92–97] basic algorithm. We then apply the model to analyze the influence of tariffs on international cooperation. The model suggests that there is indeed a significant potential to raise participation through trade sanctions, even when goods from different countries are nearly perfect substitutes. Furthermore we investigate the effect of trade sanctions on global welfare, environmental effectiveness, and the credibility of the tariff mechanism.     

Nexus between economic sanctions and inflation: a case study in Iran

Conventional studies have applied dummy variables to analyse the relationship between economic sanctions and inflation while we construct an index which is called Trade-Financial Sanctions (TF index). TF Index is a liner combination of indices which includes trade openness and foreign investment by applying the principal component model. Through the TF index and market exchange rate the impact of economic sanctions on inflation is analysed in the three phases of sanctions; free sanctions, heavy sanctions, and light sanctions. The results illustrate that the TF index decreases inflation when the Iran’s economy experiences free sanctions or light sanctions relative to when the economy is in heavy sanctions. Heavy sanctions create instability in the market exchange rates and widening the gap between the market and the official exchange rates. Furthermore, economic sanctions increase expected inflation among the people and drive higher inflation. Therefore, these results suggest that the government should work more seriously to solve the main obstacles of trade and investment inflows imposed by the economic sanctions.     

International sanctions’ impact on energy efficiency in target states

This paper investigates the impact of international sanctions on energy efficiency by employing the panel fixed effect as well as average marginal effect from the Tobit model via data on 30 sanctioned states over the period 1996–2015 with international sanctions including unilateral, plurilateral, U.S., EU, UN, economic, and non-economic cases. Overall, we find that the imposition of unilateral sanctions leads to a 0.067% decrease in energy efficiency, but that of plurilateral sanctions positively contribute to energy efficiency in the case of the full sample of countries. Moreover, the imposition of UN sanctions has a greater decrease on energy efficiency in the target states than the 0.042% reduction of energy efficiency when the sanctionist is the U.S. For robustness, empirical results indicate that the imposition of plurilateral sanctions results in a drop of energy efficiency in Islamic countries, but an increase in non-Islamic countries, while there are also negative shocks induced by the imposition of EU sanctions on energy efficiency in Asian countries, but not for non-Asian countries. We also consider endogenous problems and dynamic specification by using indicator variables and System GMM. In summary, our empirical findings provide policy suggestions for those sanctioned countries about how to maintain energy efficiency when facing international sanctions.     

IMPACT OF ANTI-APARTHEID SANCTIONS ON SOUTH AFRICA: SOME TRADE AND FINANCIAL EVIDENCE

Economic sanctions against South Africa presumably are intended to cause economic damage. Trade sanctions should induce the South African terms of trade to deteriorate, and investment sanctions should cause capital flight and cause the exchange rate to deteriorate. However, due to the nature of the South African economy and to certain policies of the South African government, these impacts may be difficult to achieve.     

Do economic sanctions affect protectionism? Evidence from agricultural support

The objective of this paper is to examine whether economic sanctions contribute to influencing the target countries’ protectionist policies in the agricultural sector. Using pooled mean group estimations in a dynamic heterogeneous panel setting, we find robust empirical evidence that, in the long‐run, economic sanctions decrease agricultural protection in the target counties, and this effect is mitigated by the wealth of the target's economy. However, the relationship is insignificant in the short run. Furthermore, our results also suggest that the impact of sanctions on agricultural protection (a) increases with the severity of economic sanctions, (b) is greater for multilateral sanctions than unilateral sanctions, and (c) is more severe on agricultural protection when sanctions span a longer duration.     

Migration,social security,and economic growth

This paper studies the effect of population aging and international migration on economic performance. Fertility is endogenized so that immigrants and natives can have different fertility rates, which provides a more realistic view of policy effects. Fertility is an important determinant to the tax burden of social security since it affects the quantity and quality of future tax payers. We find that introducing immigrants into the economy can reduce the tax burden of social security. If the survival probability of young agents to old age (or the replacement ratio) is high enough, the growth rate of GDP per worker for an economy with international migration will be higher than for a closed economy. Regarding migration policies, our numerical results indicate that economic growth rate of GDP per worker will first decrease then increase as the flow of immigrants increases. Attracting more skilled immigrants will enhance economic growth.     

A structural VAR business cycle model for a volatile small open economy

New Zealand is a small economy exposed to a volatile climate, relatively volatile international trade prices, and its exposure to international financial markets has increased markedly since economic reforms in the 1980s. This paper applies identification techniques suggested by Cushman and Zha [Cushman, D.O. and Zha T.A., 1997. Identifying monetary policy in a small open economy under flexible exchange rates, Journal of Monetary Economics, 39, pp. 433–448.], Zha [Zha, T.A., (1999). Block recursion and structural vector autoregression, Journal of Econometrics, 90, pp. 291–316.] and Dungey and Pagan [Dungey, M. and Pagan, A., 2000. A structural VAR model of the Australian economy, The Economic Record, 76, pp. 321–342.] to develop a large four block structural VAR model of the New Zealand business cycle to capture these features. The model reveals that climate and international trade price shocks have been more important sources of business cycles fluctuations than international or domestic financial shocks. Furthermore, the model does not encounter the price and exchange rate puzzles that have bedevilled attempts to identify monetary policy shocks in small open economy SVAR models.     

The Ideology of Intellectual Property Rights in the International Economy

Since the arrival of the World Trade Organization (WTO) in 1995 a number of side agreements have also been negotiated that seek further rationalization of the emerging global economy. Prominent among these is the agreement on Trade-Related Intellectual Property Rights, or TRIPS. Enforcement of the TRIPS agreement would involve the multilateral trade sanctions mechanism of the WTO. This paper examines justificatory arguments for the defense of intellectual property rights in the international economy. These arguments are based on the "classic" philosophic writings of Locke, Hegel, and Bentham. It is found that these well-known philosophic defenses for exclusive property rights do not hold up well when applied to intellectual property.     

Growth and optimal policies in an R&D-growth model with imperfect international capital mobility

In this paper, we examine the effects of international capital mobility on innovation, growth, and optimal growth policies in a small open economy with R&D-driven growth. Households can borrow funds from an imperfect international capital market to finance their investment in R&D firms. We show that the economy can reach a higher growth rate if international capital is more mobile. This result is consistent with recent empirical findings. Moreover, we show that the common growth-enhancing policies, such as patent protection and the R&D subsidies, have an additional negative welfare effect when households can access the international capital market. Accordingly, the optimal patent protection and R&D subsidy should be smaller when the degree of international capital mobility is higher.     

国际收支约束下中国经济的长期增长——基于BPCG模型的实证分析

改革开放以来,我国经济快速发展,国际化程度不断提高,形成了"双顺差"的国际收支结构。这种结构并不利于我国经济的稳定增长和对外经济关系的和谐。本文通过拓展的国际收支约束下经济增长模型(BPCG),实证分析了1982-2005年间我国长期理论经济增长率与实际增长率的差异,分析其原因,并明确了促进国际收支平衡来保持宏观经济稳定的政策着力点。要在促进国际收支平衡的同时保证我国经济持续稳定增长,有必要积极扩大内需、并优化贸易结构。     

Between the hammer and the anvil: The impact of economic sanctions and oil prices on Russia’s ruble

Exchange rate fluctuations strongly affect the Russian economy, given its heavy dependence on foreign trade and investment. In the aftermath of the conflict between Russia and Ukraine that broke out early 2014, the Russian ruble lost 50% of its value against the US dollar. The impact of the conflict on Russia may have been amplified by sanctions imposed by Western countries. However, as Russia is heavily dependent on natural resource exports, another factor behind the deterioration could be the sharp decline in oil prices starting in summer 2014. Using high-frequency data on nominal exchange and interest rates, oil prices, actual and unanticipated sanctions, we provide evidence on forces underlying the ruble exchange rate. The analysis is based on cointegrated VAR models, where fundamental long-run relationships are implicitly embedded. The results indicate that the bulk of the depreciation can be related to the decline of oil prices. In addition, unanticipated sanctions matter for the conditional volatility of the variables involved.     

Industrialization, Economic Growth, and International Trade

This paper analyzes the relationship between economic growth, industrialization, and international trade in a two-sector endogenous growth model. With learning-by-doing, the economy grows perpetually along a balanced growth path, with manufacturing's relative price declining continuously. Under trade, its pattern of trade and growth will be affected by external growth. If it remains diversified under trade, its growth can keep in pace with the rest of the world. If the growth rate of the rest of the world is higher than a certain limit, the economy cannot catch up and will eventually produce agriculture only.     

资源配置、产业结构与全要素生产率：基于真实经济周期模型的分析*

本文旨在测算、分析中国经济及各产业部门的全要素生产率和年均增长率、产业结构高度及其合理化程度，再结合其他37个国家的相应数据进行国际比较。本文依据真实经济周期模型推导出全要素生产率的测算方程并构建了测算产业结构高度及其合理化程度的两个指标。本文发现，由三大产业部门全要素生产率水平之间的差异和部门间规模巨大的人力资本转移而形成的“结构效益”，能够合理解释中国经济整体全要素生产率年均增长率较高但三大产业部门却处在较低水平甚至负增长这两个看似矛盾的经济事实。本文从数理逻辑和经验研究两个角度验证了“产出增长率效应”和“结构效益”的存在。本文通过国际比较发现，中国经济产业结构高度及其合理化程度大幅落后于多数高收入国家。     

International Trade and Growth Miracles: the Implications of Nonhomothetic Preferences

If the rate of saving increases with income then a low per capita level of the capital stock may be self‐sustaining. In these circumstances international trade may allow an economy to quickly increase its per capita capital stock in a self‐reinforcing “growth miracle” process. A labor‐abundant economy trading with a capital‐abundant economy will see its wage rate rise relative to autarky. This rise in the wage rate also increases the savings rate and so raises the following period’s per capita capital stock. In this way a low‐income economy may exhibit large and permanent increases in its level of GDP per capita after opening its markets to international trade.     

Can the augmented Solow model explain China’s remarkable economic growth? A cross-country panel data analysis

China’s economy grew at an average annual rate of 9% over the last three decades. Despite the vast empirical literature on testing the neoclassical model of economic growth using data on various groups of countries, very few cross-country regressions include China and none of them particularly focuses on the explanation of China’s remarkable economic growth. We attempt to fill this gap by utilising panel data on 146 countries over the period 1980–2004 to examine the extent to which the rapid growth of China and the huge gap in the growth rate between China and other countries can be explained by the augmented Solow model. Using system GMM estimation techniques, we find that, in spite of the restrictive assumptions involved, the Solow model augmented by both human capital and structural change provides a fairly good account of international variation in economic growth. In particular, China’s relative success in economic growth is due to high physical capital investment, conditional convergence gain, dramatic changes in the structure of employment and output, and low population growth.     

International and Intergenerational Aspects of Capital Income Taxation in an Endogenously Growing World Economy

This paper discusses how capital income taxation affects economic growth and welfare in an endogenously growing world economy with perfect capital mobility and worldwide externalities. Worldwide externalities provide a mechanism for equalizing national growth rates even with different capital income tax rates. The welfare of future generations is more influenced by a change in the growth rate than by the international spillover effect, which has been the primary concern of the previous studies. Moreover, our model finds intergenerational conflicts arising from the change in the growth rate caused by a change in the source tax rate of the foreign country.     

IMPACT OF TRADE SANCTIONS ON SOUTH AFRICA: A SOCIAL ACCOUNTING MATRIX APPROACH

This paper discusses a new approach for studying sanctions based on multipliers derived from the Social Accounting Matrix. I apply the methodology to the South African case and discuss output effects and distributional impacts on factors and households. The results show that the effects of trade sanctions on the South African economy are significant.     

Globalization,labor standards,and women's rights: dilemmas of collective (in)action in an interdependent world

This paper challenges the idea that a “social clause” to enforce global labor standards through international trade agreements serves the interests of women export workers in poor countries. Drawing on fieldwork in Bangladesh and empirical studies, the author argues that exploitative as these jobs appear to Western reformers, for many women workers in the South they represent genuine opportunities. Clearly, these women would wish to better their working conditions; yet having no social safety net, and knowing that jobs in the informal economy, their only alternative, offer far worse prospects, women cannot fight for better conditions. Moreover, global efforts to enforce labor standards through trade sanctions may lead to declining employment or to the transfer of jobs to the informal economy. Lacking measures that also address the conditions of workers in this informal economy, demands for “the social clause” will reinforce, and may exacerbate, social inequalities in the labor market.     

Dual Financial Systems and Inequalities in Economic Development

This paper analyzes the emergence and the evolution of a modern banking system, in a developing economy where banks coexist with informal credit institutions. Banks have a superior ability in mobilizing savings while informal lenders enjoy a superior information on borrowers. More specifically, banks cannot observe perfectly the behavior of borrowers; therefore the latter need to provide collateral assets in order to obtain bank loans. Physical collateral is not needed to borrow in the informal credit market: informal lenders can rely on social networks to obtain information on borrowers' behavior and invoke social sanctions to enforce repayment. The sustained growth path is associated with the successful development of the banking system that gathers savings on a large scale. However, informal lenders and other traditional credit institutions are necessary in the first stage of development when collateral is scarce. In this economy, the development of modern financial intermediaries is closely associated with the accumulation of collateral assets by entrepreneurs. This implies that the initial level of development as well as the initial distribution of wealth will determine the joint evolution of the real side of the economy and the financial system. Under certain conditions, two long-run steady-state equilibria exist: in the first one the economy stops growing and the banking system never successfully develops; in the second one the economy reaches a sustained growth rate and the informal sector asymptotically vanishes. The impact of the following policies is discussed: financial repression, micro-credit institutions and redistribution of assets.