Sanctions are costly for both the initiating country and the country against which the restrictions are directed, according to a study published on the website of the International Monetary Fund. The authors of the paper consider a model of two countries, one of which produces more gas, and the other produces more finished goods. Sanctions are initiated by the second country, and its losses from such restrictions turn out to be less pronounced in any scenario - from financial sanctions on the placement of bonds to restrictions on gas imports and cross-border trade in goods.
All types of sanctions lead to additional costs for both the initiating country and the country against which the restrictions are directed, however, the damage for the second one will still be more pronounced, according to the study "World Trade and Macroeconomic Dynamics under the Impact of Sanctions", published on the website IMF (authored by Fabio Ghironi of the University of Washington, Dason Kim of the University of North Carolina, and Galip Kemal Ozgan of the Bank of Canada).
The authors explore the model of relations between the two countries: one of them - "foreign" - has an advantage in the extraction of raw materials, namely natural gas, while the "home" country uses this resource to produce final goods both for domestic consumption and for export to "foreign" countries. » country. Further, in the model, the “home” country imposes sanctions against the “foreign” one, while the restrictions apply both to access to the financial market (agents from the “foreign” country lose the opportunity to place bonds), and trade - gas imports or, conversely, exports of finished products from "home" country (and "retaliatory" sanctions imposed by the "foreign"). In a model consisting of more than two countries, the effect of sanctions is blurred, the researchers note.
Restrictions on trade in finished goods lead to a more pronounced drop in consumption in the “foreign” country, while in the case of export restrictions, the rise in the cost of importing goods from the “home” country stimulates an increase in domestic production, while restrictions on the export of finished products from the “foreign” country have the opposite effect. action (the supply of labor in the primary sector is growing).
When restricting gas imports, sanctions do not have such a pronounced impact on consumption in the "foreign" country as the total sanctions on the export and import of finished goods, however, consumption in the "foreign" country decreases more than in the "home" country, even in the absence of alternative suppliers gas. In the “home” country, gas prices are rising and the number of producers of consumer goods is decreasing, in the “foreign” country, salaries in production are falling and the number of producers of consumer goods is growing.
The impact on the exchange rate may vary depending on the type of sanctions: restrictions on gas exports lead to a weakening of the currency of the “foreign” country, restrictions on the export of consumer goods from the “home” country to strengthening (in the first case, exports of consumer goods from the “foreign” country increase). countries, in the second, domestic demand is growing, and the number of exporters is decreasing), the authors point out.