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Financial Sanctions and Economic Growth: An Intervention Time-series Approach

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  • Heydarian, Samira
  • Pahlavani, Mosayeb
  • Mirjalili, Seyed Hossein

Abstract

In the present study, the authors examined the impact of financial sanctions on economic growth using Iran's data and intervention time-series analysis over the period 2005-2017. Financial sanctions targeted the country's financial resources and increased interest rates and medium- and long-term financing costs. In general, financial sanctions adversely affected the financial sector. In this regard, blocking of assets and restricted access to financial and foreign exchange resources, depreciated domestic currency, reduced investment, exports, and production along with increased inflation and unemployment ultimately reduced economic growth. The results indicated the effectiveness of financial sanctions on economic growth in the short-run. However, during the third period (2010-2014), when severe and multilateral financial sanctions are imposed, the coefficient is negative (0.54), which is higher, compared to the other periods. As the economic sanctions of Iran have intensified, the economic growth has slowed down. Nevertheless, in the long run, financial sanctions have had a weaker negative effect of 0.19 on the economic growth.

Suggested Citation

  • Heydarian, Samira & Pahlavani, Mosayeb & Mirjalili, Seyed Hossein, 2021. "Financial Sanctions and Economic Growth: An Intervention Time-series Approach," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 51(1), pages 1-14.
    • Handle: RePEc:zbw:espost:228756
    DOI: 10.22108/IES.2020.122915.1083
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    References listed on IDEAS

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    1. Tibor Besedeš & Stefan Goldbach & Volker Nitsch, 2017. "You’re banned! The effect of sanctions on German cross-border financial flows," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 32(90), pages 263-318.
    2. Sajjad Faraji Dizaji & Peter A G van Bergeijk, 2013. "Potential early phase success and ultimate failure of economic sanctions," Journal of Peace Research, Peace Research Institute Oslo, vol. 50(6), pages 721-736, November.
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    Cited by:

    1. Arslanalp, Serkan & Eichengreen, Barry & Simpson-Bell, Chima, 2023. "Gold as international reserves: A barbarous relic no more?," Journal of International Economics, Elsevier, vol. 145(C).
    2. Heydarian, Samira & Pahlavani, Mosayeb & Mirjalili, Seyed Hossein, 2023. "Financial Sanctions and the Imports of Intermediate and Capital Goods in Iran: DID Method," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 15(2), pages 101-134.
    3. Heydarian, Samira & Pahlavani, Mosayeb & Mirjalili, Seyed Hossein, 2022. "The Impact of Financial Sanctions on Capital Inflow and Outflow (case of Iran)," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 17(1), pages 67-88.

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    More about this item

    Keywords

    Financial Sanctions; Economic Growth; Intervention Model; Iran's Economy;
    All these keywords.

    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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