Research On The Impact Of Economic Sanctions On The Economic Growth Of Target Countries

With the side effects of globalization becoming more and more serious,the international division of the labor system is increasingly unbalanced,the inequity in the distribution of globalization benefits has widened.At the same time,rising national consciousness and protectionism have caused difficulties in sovereign transfer,global governance has fallen into crisis,and international contradictions and conflicts have become more serious.Compared with high-cost military action and weak diplomatic talk,economic sanctions,as a cost-effective diplomatic tool,are increasingly favored by counties.Overall,most existing studies tend to identify whether or not sanction initiators achieve their foreign policy goals,but they rarely provide evidence for how much damage has been incurred in the sanctioned economies.This study contends that it is difficult to connect the dots between sanctions and foreign policy outcomes without an appreciation of how sanctions actually affect the economic wellbeing of target countries.On the one hand,globalization has deepened the asymmetric dependence of economies between countries and increased the sensitivity of the target economies when facing sanctions.On the other hand,the interaction and parallelism of global supply chains have improved the opportunities and capabilities of countries to evade or transfer sanctions cost.In addition,the regime of economic sanction has been updating in order to improve the efficiency and accuracy.So,do economic sanctions impair target economic growth?In order to answer the above questions,based on the economic sanctions’ theory,constructing a dynamic model of the strategic game between the sanctioning parties under incomplete information,we discuss the mechanisms and effects of economic sanctions on target economic growth.The specific questions are as follows:(1)Do economic sanctions reduce target economic growth?(2)How do economic sanctions impair target economic growth?(3)What are the moderating effects on the relationship between economic sanctions and target economic growth?(4)How different the impact of economic sanctions on target economic growth in different conditions?We construct a matching dataset of the international economic sanctions and 154 independent sovereign countries’ economic growth from 1970 to 2016,combined with the typical cases of economic sanctions against Iran in 2011,and use the two-way fixed effects model and synthetic control method to conduct empirical researches.The conclusions are as follows:(1)Overall,economic sanctions have prevented target economic growth.In particular,economic sanctions reduced Iran’s GDP growth rate from 2011 to 2017 by an average of 1.56%,and increased the volatility of Iran’s economic growth.(2)Economic sanctions mainly reduce target economic growth through domestic consumption,import and export trade,and foreign direct investment.(3)Firstly,in terms of economic sanctions’ regime,the negative impact of sanctions on target economic growth become smaller over time.The negative effect is stronger for US sanctions.Secondly,in terms of relationships between the US and target,the negative effect of US sanctions increases with the target’s level of trade with the United States.If the US is relatively stronger in the military or the target’s official currency is the US dollar,the negative effect of US sanctions will increase.However,if the target is the US ally or further far away from the US,or the target’s official language is English,the negative effect of US sanctions will decrease.Finally,in terms of the target’s background,if the target’s economy is worse,political conflicts are increasing and human rights violations are more serious,the negative effect of economic sanctions will increase.(4)During the Cold War economic sanctions had a greater negative impact on the target economic growth.Economic sanctions have more significant negative impacts on the economic growth of developing countries,emerging market countries,upper-middle-income countries,and lower-middle-income countries.Except for the Middle East and North Africa,the negative impacts are similar among different areas.Moderating factors for the impact of economic sanctions on target economic growth have various performances in those different conditions.Compared with previous studies,the possible innovations in this dissertation are the following:(1)Based on the GDP Expenditure Method,we analyze the impact mechanism of economic sanctions on target economic growth.We construct a matching dataset of the international economic sanctions and 154 independent sovereign countries’ economic growth from1970 to 2016.A large sample empirical test and mechanism test are carried out,which expands the research on the effect of economic sanctions from the perspective of the target country.(2)Constructing a dynamic model of the strategic game between the sanctioning parties under incomplete information,discussing the core factors that affect the sanctioning parties’ behaviors and their cost-benefit analysis,which expands the research about the moderating effects on the relationship between economic sanctions and target economic growth.(3)It reveals the heterogeneous effects of economic sanctions on target economic growth in different conditions such as different eras,regions and economic levels,which makes a useful attempt to deeply understand the temporal and spatial characteristics of sanctions effects.Base on the results and innovation points,there are four practical implications:(1)Target should raise awareness of economic sanctions and attach importance to the role of economic sanctions.(2)Target should strengthen economic and democratic political construction andimprove its own ability of resisting economic sanctions.The target government should take an active part in balancing the structure of imports and exports,promoting domestic consumption,improving the quality of the domestic financial system to resist external risks,and advancing the democratization of domestic politics.(3)Target should seek multilateral cooperation to increase the chances of evading sanctions.Target should be alert to excessive economic dependence on the hegemony,have more common interests with senders,build new multilateral trade and financial community with a shared future,gather the strength of developing countries,and build an anti-sanctions alliance.(4)Target should promote the construction of sanctions laws and impose targeted sanctions or counter-sanctions.Target should construct an early warning mechanism and evaluation system for economic sanctions,handling economic sanctions in a law framework,and promote the legalization and justice of economic sanctions or counter-sanctions.(5)Target should promote the reform of international organizations regulating and managing economic sanctions.International organizations should show attitudes towards economic sanctions by public opinions,ease the tension between senders and targets through political mediation,make proposals or resolutions to manage and standardize economic sanctions,and provide economic support to target countries if necessary.(6)China sets an example in responding to economic sanctions and using counter-sanctions which can provide an international demonstration effect.