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What goes around comes around: The effects of sanctions on Swedish firms in the wake of the Ukraine crisis
Author(s) -
Gullstrand Joakim
Publication year - 2020
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.13000
Subject(s) - sanctions , economics , shock (circulatory) , productivity , financial crisis , monetary economics , international economics , macroeconomics , medicine , political science , law
This study uses the sanctions imposed on and by Russia in 2014 as an exogenous shock on Swedish firms. The results suggest that the total short‐run cost of these sanctions on the Swedish economy amounted to around 1 billion SEK in 2013 prices, which implies a rather limited impact (around 0.025% of the Swedish GDP). The sanction effects were, however, highly asymmetric, and the direct effect on firms exporting banned products to Russia was a 70% drop in exports to Russia and an increased probability of exiting this market with 0.6 units. The indirect effects on nonbanned products were a 36% drop in sales and an increased probability of exiting of around 0.2 units. The disruption on the Russian market also created ripple effects outside this market, which was manifested in a 20% drop in the domestic production of banned products, a 12% drop in sales on markets outside Russia and a new export pattern. These negative ripple effects were also found to be pronounced in firms with their core products exposed to these sanctions, in firms with financial distress and in regions with a relatively low level of labour productivity.