Do Sanctions Increase Borrowing Costs? Measuring the Effectiveness of Economic Sanctions in a Post Cold War Global Economy:

Abstract

This paper examines the effect of economic sanctions on borrowing costs in targeted countries. A number of political and economic developments since the end of the Cold War have had a profound impact on sanctions use. This, combined with an increasingly global economy has raised doubts regarding the continued use and effectiveness of economic sanctions. Using data on lending rates in a panel of 53 countries from 1990-2010 and a fixed effects regression model, I test the effect sanctions imposition in a given year has on borrowing costs. I find that sanctions imposition significantly increases lending rates, while anticipatory and residual effects of sanctions imposition are less clear.