Financial Sanctions

In the present study, the authors examined the impact of financial sanctions on economic growth using Iran's data and intervention time-series analysis over the period 2005-2017. Financial sanctions targeted the country's financial resources and increased interest rates and medium- and long-term financing costs. In general, financial sanctions adversely affected the financial sector. In this regard, blocking of assets and restricted access to financial and foreign exchange resources, depreciated domestic currency, reduced investment, exports, and production along with increased inflation and unemployment ultimately reduced economic growth. The results indicated the effectiveness of financial sanctions on economic growth in the short-run. However, during the third period (2010-2014), when severe and multilateral financial sanctions are imposed, the coefficient is negative (0.54), which is higher, compared to the other periods. As the economic sanctions of Iran have intensified, the economic growth has slowed down. Nevertheless, in the long run, financial sanctions have had a weaker negative effect of 0.19 on the economic growth.

During the last three decades, financial sanctions have been imposed on Iran by the United States, the European Union, and the United Nations Security Council. This paper aims at estimating the effect of financial sanctions on the import of capital and intermediate goods in Iran, which was carried out for two independent time periods. The first period (2010-2013) includes multilateral financial sanctions, and the second period (2016-2019) includes multilateral sanctions and the withdrawal of the United States from the JCPOA. We examined the impact using the difference-in-difference (DID) method. The results of the first period indicate that the decrease in the imports of capital and intermediate goods in Iran depends more on the countries that "provided the sanctions plan" than the countries that did not provide the sanctions plan, because the coefficient of dummy variable for implementation in the random effects model is statistically significant. The negative effect of 0.007 on imports shows that the effect is weak, because this group of countries behaved differently. In the second period, the random effects model is statistically significant. In this model, the negetive effect of 0.22 on imports indicates a significant effect. Therefore, the reduction of Iran's imports in this period depends more on the countries that provided the sanctions plan than the countries that did not provide the plan.