In the old literature on sanctions, costs imposed on the economy had to be pretty large in order to effect change (Hufbauer notes sanctions had an average impact around 2% of GDP, which wasn’t much; sanctions on Iraq were on the order of 5%). Those announced on Russia so far would not have that magnitude of impact in the short run (maybe different in the longer run). However, cutting off Russia from SWIFT — in addition to other restrictions on financial transactions — might come closer. Sanctioning the Central Bank of Russia, apparently under consideration, might come yet closer.
Category Archives: international
Russian Asset Prices Today
Ruble down about 7%, sovereign bond yields up 4.7 percentage points in 6 days, stock market down 1/3 in one day.
Russia EMP Watch
One way to assess external financial stress is to look at exchange market pressure (EMP) – the change in the exchange rate, change in reserves, and change in interest rates, possibly weighted by inverse of standard deviations. or otherwise (see e.g., Patnaik, et al. (2017) for several different versions).
Would Pumping More Natural Gas in America Have Countered Russian Pressure?
A reader suggests this is the case. Well, if there was an integrated natural gas market, maybe. (To anticipate the answer to the question: Duh, NO).
Interpreting Macroeconomically a War Scenario, Graphically
Most of the discussion of the macro implications of an expanded Russian invasion of Ukraine presumes elevated oil prices (e.g., [1]). This makes sense, certainly for the short run. However, if oil prices rise sufficiently (keeping in mind for Brent have already risen from about $70/bbl to $90/bbl), they will kick the economy into a slowdown. Slowdowns tend to push down oil prices. I think in terms of graphs; this is how I see the short term, and (potentially) medium term.
Russia, FX Reserves and External Pressures in the Event of War
A recent NY Times article noted that Russia had taken measures to insulate itself from economic sanctions, including building up foreign exchange reserves. It’s true reserves are high, and in relative terms more so once one considers that nominal GDP [in USD terms] is smaller than in 2014.
Risk and Uncertainty before the Open
VIX jumped on Friday; the Economic Policy Uncertainty index rose on Saturday.
Guest Contribution: “Inflation, Fed policy and emerging markets”
Today, we are pleased to present a guest contribution by Steven Kamin (AEI), formerly Director of the Division of International Finance at the Federal Reserve Board. The views presented represent those of the authors, and not necessarily those of the institutions the authors are affiliated with.
“Foreign Direct Investment under Uncertainty”
From the conclusion to NBER WP No 29687 (paper), coauthored with Caroline Jardet and Cristina Jude (both Banque de France):
“Covid Impact and Macroeconomic Policy in Asia”
That’s the title of a presentation at the ASSA meetings (YouTube video of the presentation is here) in the ACAES panel “Covid and Recovery in Asia” (see below). Calla Wiemer presented, and I discussed. [Updated 1/19, links to slides added]