Timing the impact of sanctions on trade

Abstract

February 19, 2021 Abstract We capitalize on the latest estimation methods in the empirical gravity literature and the development of a new dataset (the Global Sanctions Data Base, GSDB) to study the evolution, over time, of the effects of sanctions on international trade. Our analysis reveals that the contemporaneous effects of sanctions on trade are large, negative and statistically significant. Additionally, we obtain negative and significant anticipatory effects prior to the official imposition of sanctions, as well as negative and significant post-sanction effects, which disappear gradually approximately eight years after the lifting of sanctions. Our work generates several insights related to the estimation of the impact of sanctions on trade and unveils new avenues for future work. For example, we find the strength of the negative impact of sanctions to rise with the duration of the time that sanctions are in force. Moreover, our analysis of unilateral vs. multilateral and US vs. UN vs. EU sanctions suggests that unilateral sanctions and sanctions imposed by the US stand out as being most effective. A battery of sensitivity experiments confirms the robustness of our main findings and conclusions.