National Interests: Priorities and Security
 

The model of Sanction Intensity Index: Evidence from Russia

Vol. 14, Iss. 1, JANUARY 2018

Received: 8 August 2017

Received in revised form: 13 September 2017

Accepted: 23 October 2017

Available online: 16 January 2018

Subject Heading: ECONOMIC SECURITY

JEL Classification: E44, F34, F51, G15

Pages: 62–77

https://doi.org/10.24891/ni.14.1.62

Omel'chenko A.N. Central Economics and Mathematics Institute, Russian Academy of Sciences, Moscow, Russian Federation
alexey.omelchenko@mail.ru

ORCID id: not available

Khrustalev E.Yu. Central Economics and Mathematics Institute, Russian Academy of Sciences, Moscow, Russian Federation
stalev777@yandex.ru

ORCID id: not available

Importance The assessment and evaluation of an impact of sanctions on various economies are important and timely, being the subject of some researches by foreign and Russian authors.
Objectives We attempt to build a simple model of the sanction intensity index with evidence from Russia. To assess an impact of different sanctions, we included not only the volume of bilateral trade relations with Russia, but also a percentage of respective currency in the foreign debt of Russia’s economic sectors, size and coherence of legal entities and financial institutions subject to financial sanctions, and role of the sanctioned country in tight oil and gas production.
Methods We use a set of methods and principles of scientific cognition and research, methods of logic and statistical analysis as the methodological framework.
Results The modified sanction index gives a more detailed view of trends and severity of sanctions in comparison with the proposed indicator. We demonstrate that the intensity of sanctions falls if specific factors are considered. The proposed index can substitute the political risk factor in macroeconomic models of Russia and debt capital market development modeling.
Conclusions and Relevance Having analyzed resultant weights of the modified sanction index, we found that sanctions against too-big-to-fail banks have the strongest effect. Sanctions against the Oil&Gas sector have the least significance for the debt capital market of Russia since the Oil&Gas sector accounts for a small share in external financing. The effect grows in the mid term if we consider investment expenses for exploration and production of oil and gas, with some of them being financed through the debt.

Keywords: sanction index, debt capital market, effective interest rate

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