5/2017 Konstantin A. Kholodilin, Aleksei Netšunajev. Crimea and punishment: The impact of sanctions on Russian and European economies

Working Papers of Eesti Pank 5/2017

The conflict between Russia and Ukraine that started in March 2014 led to bilateral economic sanctions being imposed on each other by Russia and Western countries, including the members of the euro area. The paper investigates the impact of the sanctions on the real side of the economies of Russia and the euro area. The effects of sanctions are analysed with a structural vector autoregression. To pin down the effect we are interested in, we include in the model an index that measures the intensity of the sanctions. The sanction shock is identied and separated from the oil price shock by narrative sign restrictions. We nd a very high probability that Russian GDP declined as a result of the sanctions. In contrast to that, the effects of the sanctions on the euro area are limited to real effective exchange rate adjustments.

JEL Codes: C32, F51
Keywords: political conflict; sanctions; economic growth; Russia; euro area; structural vector autoregression

Konstantin A. Kholodilin (corresponding author): DIW Berlin. E-mail: kkholodilin [at] diw.de
Aleksei Netšunajev: Eesti Pank. E-mail: aleksei.netsunajev [at] eestipank.ee

The views expressed are those of the authors and do not necessarily represent the offcial views of the Eesti Pank or the Eurosystem.