Do Sanctions Cause Economic Growth Collapses?

Abstract

AbstractThis chapter explores whether economic sanctions are able to trigger sudden economic growth collapses. The primarily aim of economic sanctions is to cause a political or behavioural change by imposing serious restrictions on important economic activities undertaken by the target country. In particular, the basic idea is that sanctions cause a large adverse and sudden shock to the target’s economy. It assumes that when this shock is severe enough, the target country is more willing to cooperate. The findings reported in this chapter clearly demonstrate that economic sanctions have a significant positive effect on the likelihood of a growth deceleration in the first three years after the first threat signals or actual imposition. It turns out that not all sanctions are equally successful in creating a sudden economic shock. In particular, trade sanctions, multilateral sanctions, and sanctions aimed at the business sector are the most harmful for the economy of the target country.