Axelle Ferrière Discussion of: Sanctions and the Exchange Rate

The invasion of Ukraine by Russia in February 2022 prompted numerous countries to impose economic sanctions against Russia. In the months following the onset of the conflict, coalitions of nations collaboratively devised a set of measures aimed at restricting trade with Russia. Additionally, assets belonging to Russian individuals or companies were frozen. The scale of these sanctions has been unparalleled, marking a historic moment not witnessed for decades. This pertains not only to the extent and variety of economic actions taken against Russia but also to the aspect of implementing such actions against a nation of Russia's size and geopolitical importance. To evaluate the impact of sanctions on the Russian economy, analysts examined the exchange rate, which has the advantage of being available in real time. Initially, after the sanctions were imposed, the Ruble experienced depreciation, prompting several analysts to assert the effectiveness of the sanctions. However, a few months later, the Ruble began to appreciate, eventually surpassing its pre-war level in late spring 2022 and maintaining this elevated position for several months. This rebound in the Russian currency raised inquiries about the correlation between sanctions and exchange rates: is it inevitable for the currency to depreciate after sanctions, and if so, why?