I am trying to estimate the effect of economic sanctions on the target country's economy. For that I need the cost of sanctions on the target country.
I have been searching for a database that might contain this information, but no such thing exists. Most papers have estimated the cost of sanctions themselves, but it is not clear how.
If you have any information or suggestions regarding this matter, please let me know.
An input - output (import - export) matrix for GDP could provide some guidance as to which sectors are sensitive to international sanctions: You could get Gross Domestic Product for the target country from official sources, divided up according to major Standard Industrial Sectors (Banking, farming, mining, manufacturing, tourism, ..., government sector). Then you could take a stab at trying to work out (A) which sector/s is being targetted (B) How effective the sanction will be in denting that sector. Then add together all the dents for all affected sectors. This approach would be better that just guessing the gross impact of sanctions on GDP.
You will also need to correct for the estimated duration of the sanctions, as GDP figures relate to one year's duration. There will also be a delay between full implementation of sanctions, local stocks drying up, before alternative (more expensive) sources are established or developed locally. This difference is the basic cost of sanctions.
As you can realise, sanctions are a very blunt tool!
Hamideh,
You will have to create a model for the country you are interested in vs. all other countries. Then you can apply the sanctions. Some people use a gravity model. But I recommend a computational general equilibrium model.
The data base I recommend is GTAP. I am attaching a list of countries and sectors GTAP covers.
It depends on in terms of which outcome you want to measure the cost. Sanctions can affect trade, investment, growth, etc. The simplest way would be to have a model for the variable of interest -- growth equation, gravity model of trade or investment, etc -- where you account for other determinants of the outcome of interest and include a dummy variable for the period under sanctions. That would give you a rough estimate.
I must contradict my RG colleague. Stay away from gravity models. They are a red herring; they have no foundation and anyway have no application here.
Hi Hamideh,
Actually, it could be seen much easier. Not to forget that all (numerical) values in economics are calculated using a basic equation of P*Q.
In this case, you should first calculate what the real GDP might be if there was no sanction at all in place. It is actually calculated through a simple projection of the previous trend of real GDP (before the sanctions).
Then you need to calculate the impact that the sanctions have had on the general consumer price index. The final step consists of calculating how much more the consumers have to pay (with the sanctions) to achieve the real GDP estimated with the assumption of no sanction.
Good chance,
J.A.
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