Influence of Economic Sanctions: Empirical Evidence for Iran and Russia

In this chapter, the issues of the impact of sanctions on macroeconomic indicators in the Islamic Republic of Iran and the Russian Federation have been investigated. For this purpose, we used macroeconomic data during 1988–2018. Thus, to investigate sanctions’ influence on the economies of Iran and Russia panel vector autoregression model has been constructed. Impulse response functions of model’s variables identify deterioration of macroeconomic indicators of both countries in short run with stabilizing in 5 year-period. Dynamics of export and imports of goods and services, gross capital formation, final consumption expenditure of households, oil rent is characterizing by growing trends in short run. At the same time, Dubai oil price index is falling, and then slightly increasing during this period. However, unlike most variables, foreign direct investments inflow demonstrates an inconsiderable increase. From our point of view, it can be explained by returning of earlier withdrawn capital. Nevertheless, the unemployment rate is rising insignificantly. Analysis of variance decomposition shows increase of significant dependence on oil price growing from 5.6% in the first period to 25% in the second one. Gross capital formation is the second most significant factor of GDP growth in both countries. Imposing of sanctions constitutes near 4% of GDP growth fluctuations in Iran and Russia.