Economic sanctions serve as a foreign policy tool, but they can also hurt domestic firms doing business in the target country. This column looks at the effects of sanctions imposed by 37 countries on Russia over the conflict in Ukraine. The estimated loss of exports to Russia totalled $3.2 billion per month between December 2013 and June 2015. This loss was mostly incurred by European economies and in products not targeted by retaliations. French firm-level data points to a deterioration of trade finance services as the dominant mechanism.
Matthieu Crozet, Julian Hinz, 05 July 2016
Enikolopov Enikolopov, Maria Petrova, Konstantin Sonin, 20 June 2016
In addition to the traditional mass media, social media has become a channel through which citizens can hold public officials and corporate leaders to account. But social media commentators can be vulnerable to manipulation and reputational damage. This column uses data on a popular blogger in Russia to show that blogs are critical of corruption in state-controlled companies can lead to decreased profit diversion and corruption by the targeted companies. Social media appears to play an important role in improving accountability, particularly when traditional media is censored or political competition is limited.
Çağatay Bircan, Ralph De Haas, 15 May 2015
Innovation enhances economic growth but the mechanisms that underpin the spread of products remain largely unclear. Based on new micro-data from Russia, this column argues that access to credit helps firms to adopt products and production processes that are new to them. However, there is little evidence that bank credit stimulates in-house R&D. Thus, banks can facilitate the diffusion of technologies within developing countries but their role in pushing the technological frontier is limited.
Martin Brown, Ralph De Haas, Vladimir Sokolow, 14 March 2015
Financial dollarisation, the widespread holding of assets and liabilities in a foreign currency, is often viewed as a threat to financial stability in emerging markets. However, there is not enough evidence that monetary policy is responsible for low dollarisation. This column uses cross-regional evidence from Russia to show that monetary stability is indeed a key determinant of dollarisation. Moreover, banking integration strongly influences how households and firms adjust the currency composition of their assets and liabilities to changes in monetary conditions.
Maxim Ananyev, Sergei Guriev, 08 February 2015
The negative effects of recessions are not limited to consumption. Among others, they could also be harmful to preferences and values. This column uses recent evidence from Russia to argue that recessions can result in a sizeable decrease in interpersonal trust. This effect is transient in places where the fall in trust is small. In these regions, trust snaps back to pre-crisis levels as GDP recovers. In the places where fall in trust is large, the effect is persistent. Even after a recovery, trust remains 10 percentage points below the pre-crisis level.
Lorenz Kueng, Evgeny Yakovlev, 10 September 2014
Understanding consumer behaviour is crucial for many economic questions. This column looks at the persistence of consumer habits towards alcohol among Russian males. Beer sales expanded rapidly after the collapse of the Soviet Union both in levels and relative to vodka sales, driven mainly by the beer consumption of cohorts born in the 1980s and 1990s. The authors estimate that this trend will reduce the male mortality rate in Russia by one quarter in the next 20 years.
Yuriy Gorodnichenko, Gérard Roland, 04 September 2014
With the crisis in Ukraine escalating further, the question on everyone’s mind is when and how peace can be restored. This column describes three different scenarios where Ukraine continues fighting with or without economic and military help from the West. The authors suggest that though Russia’s chances of winning are small, the policy response of the West could be essential in resolving the conflict quickly.
Aasim Husain, Anna Ilyina, Li Zeng, 29 August 2014
The conflict in Ukraine and the sanctions against Russia have already affected the Russian financial markets. This column discusses the repercussions for the rest of Europe of possible disruptions in the trade and financial flows with Russia. Eastern European countries could be seriously affected by a slowdown in the Russian economy due to their close links with Russia. Western countries – despite having looser links with it – could also experience significant effects.
Thorvaldur Gylfason, Inmaculada Martínez-Zarzoso, Per Wijkman, 14 June 2014
The Ukraine saw EU soft power met by Russian hard power. This column argues that the EU should counter this hard power using trade policy, among other policies. EU members should agree a common policy and seek support from others to execute this policy. To date, the EU’s response has been too little, too late.
Peter van Bergeijk, 25 April 2014
In reaction to the Crimean crisis, the EU imposed certain sanctions on Russia. Russia responded by blacklisting EU and US officials. This column discusses the comparative vulnerability of the EU and Russia amid this tit for tat pattern. In purely economic terms, the EU is in a much better position than Russia. However, political regimes also matter. The autocracy score for Russia dampens the impact that the economic sanctions would have politically. The democratic nature of the European governments would translate the sanctions imposed by Russia into great political pressure for the EU. This makes the Russian tit for tat threat realistic.
Alvaro González, Leonardo Iacovone, Hari Subhash, 12 February 2014
Growth in Russia comes from few natural-resource-linked sectors and to a few firms; the economy is currently less diversified than it was during the Soviet times. This column presents evidence that the emergence of new firms is not the binding constraint on diversification: it is the poor survival odds of new firms, created by long, deep Russian economic slumps. More competition would help to drive out less efficient, older firms, and create space for young and efficient ones to survive and thrive.
Thorvaldur Gylfason, Per Wijkman, 25 January 2014
The EU’s Eastern Partnership is currently in turmoil. Armenia and Ukraine – two of the four partner countries (which also include Moldova and Georgia) did not initial association agreements. This column discusses the role of Russia in discouraging such negotiations. The soft power of the EU was apparently no match for the hard power of Russia in the cases of Armenia and Ukraine. A successful partnership would require peaceful international relations between the four partners, and solving their conflicts with Russia.
Anton Cheremukhin, Mikhail Golosov, Sergei Guriev, Aleh Tsyvinski, 10 October 2013
Soviet Russia’s industrialisation was a pivotal episode in the 20th century, and economic historians have spent decades debating the role of Stalin’s policies in bringing it about. This column argues that Stalin’s industrialisation was disastrous even in purely economic terms. The brutal policy of collectivisation devastated productivity, both in manufacturing and in agriculture. The massive welfare losses in the years 1928-40 outweighed any hypothetical gains from Stalin’s policies after 1940, and Russia would have been better off under a continuation of the ‘New Economic Policy’.
Anders Åslund, 04 September 2013
Emerging markets are under pressure. This column argues that this is not a mere headwind but that the BRICs’ party is over. Their ability to get going again rests on their ability to carry through reforms in grim times for which they lacked the courage in a boom.
Irena Grosfeld, Ekaterina Zhuravskaya, 23 March 2013
History influences the politics of every nation. But how exactly can we measure it? This column presents new research that assesses the influence of empires on Poland’s current political makeup. In particular, the centuries-old partition of Poland continues to influence politics through its long-lasting effects on infrastructure and religion.
Simon Commander, Alexander Plekhanov, 29 January 2013
Russia aims to diversify its economy and reduce its dependence on natural resources. Despite laudable aims, this column argues that progress has been sluggish. Longstanding obstacles of corruption, low business-entry rates and weak competition afflict other countries that, like Russia, are in transition. Yet Russia comes pretty much bottom of the class. Crucially, the fact that economic diversification requires improvements to education and skills acquisition has been somewhat overlooked by the state. What attempts the state has made, such as supporting technology innovation, appear to have been ineffectual and, at times, counterproductive. Going forward, Russia would do well to focus on improving incentives for market-relevant research and development, complemented by private sector-led sources of finance for early-stage firms.
Simon Evenett, 20 July 2012
Simon Evenett of the University of St Gallen talks to Viv Davies about the recent increase of protectionist measures in the world trading system. They also discuss the implications of the rise in regional trade agreements, the potential effects of Russia joining the WTO and the impact of slow growth in Europe on the region’s trade with the rest of the world. Evenett maintains that defenders of the world trading system should do more to prevent the current subordination of trade policy. The interview was recorded by telephone on 17 July 2012.
Andrei Shleifer, 05 February 2012
Twenty years ago, communist countries began their shift towards capitalism. What do we know now that we didn’t know then? Harvard's Andrei Shleifer, the Russian-born, American-trained economist, provides his answers and their relevance for contemporary policymakers.
Ruediger Fahlenbrach, Robert Prilmeier, René Stulz, 27 May 2011
Crises are a regular event in financial markets. But do banks that have been hit particularly hard in one crisis learn from the experience and suffer less in future crises? This column suggests not. It shows that banks particularly hard hit by the 1998 financial crisis were also badly affected by the recent financial crisis. It blames the high-risk business models on which these banks rely.
Barbara Oegg, Kimberley Elliott, 08 October 2008
Should Western powers take more significant actions against Russia to punish its hostilities with Georgia? This column, based on analysis of all major sanctions episodes in the 20th century, argues that sanctions against Russia would be futile.