Volume 18, Issue 1 (3-2023)
J. Mon. Ec. 2023, 18(1): 33-50 |
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Mohabatpoor R, Googerdchian A, Azarbaijani K. Investigating the Effect of Financial Sanctions on International risk-sharing in Developing Countries using Propensity Score Matching Approach. J. Mon. Ec. 2023; 18 (1) : 2
URL: http://jme.mbri.ac.ir/article-1-622-en.html
URL: http://jme.mbri.ac.ir/article-1-622-en.html
1- Faculty of Administrative Science and Economics, University of Isfahan
Abstract: (384 Views)
The present study investigated the effect of imposing international financial sanctions on international risk sharing in developing countries during 2011-2022 using the propensity score matching (PSM) approach. International risk sharing refers to the processes in which countries with different income prospects share the risk of income fluctuations with one another by conducting commercial and financial transactions internationally. Therefore, their income and consumption no longer depend solely on domestic production, but also depend on the production of other countries (countries that own their assets). Since, international capital flows are the main tools for international risk sharing. Imposing international financial sanctions on a country reduces international capital flows and therefore reduces international risk sharing in that country. As the results showed, the impact of financial sanctions on international risk sharing has been negative and significant because the measure of the international risk sharing index in countries that were not subject to sanctions (control group) was 0.5877 and in countries that were subject to sanctions (treatment group) was 0.2431. Therefore, imposing international financial sanctions has reduced risk sharing in developing countries.
Article number: 2
Keywords: International Risk-Sharing, International Financial Sanctions, Developing Countries, Propensity Score Matching Approach
Type of Study: Original Research - Empirical |
Subject:
Macroeconomics
Received: 30 Jan 2023 | Accepted: 14 Jan 2024 | Published: 29 Apr 2024
Received: 30 Jan 2023 | Accepted: 14 Jan 2024 | Published: 29 Apr 2024
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27. Baxter, M. (2012). International risk-sharing in the short run and in the long run. The Canadian Journal of Economics / Revue Canadienne d'Economique, 45(2), 376-393. http://www.jstor.org/stable/41485654. [DOI:10.1111/j.1540-5982.2012.01699.x]
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29. Flood, R. P., Marion, N. P. & Matsumoto, A. (2012). International risk-sharing during the globalization era. The Canadian Economics Association, 45(2), 394-416. [DOI:10.1111/j.1540-5982.2012.01700.x]
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31. Heckman, J. J., Lalonde, R. J., & Smith, Jeffrey A. (1999). The economics and econometrics of active labor market programs. Handbook of Labor Economics, 3(1), 1865-2097. [DOI:10.1016/S1573-4463(99)03012-6]
32. Keshavarz Haddad, G. (2017). Econometrics of microdata and policy evaluation. Tehran: Ney Publications.
33. Lee, Wang-Sheng. (2013). Propensity Score Matching and Variations on the Balancing Test. Empirical Economics, 44(1), 47-80. [DOI:10.1007/s00181-011-0481-0]
34. Lewis, K. (1999). Trying to explain home bias in equities and consumption. Journal of economic literature, 37, 571-608. [DOI:10.1257/jel.37.2.571]
35. Li, Q. & Resnick, A. (2003). Reversal of Fortunes: Democratic Institutions and Foreign Direct Investment Inflows to Developing Countries. International Organization, 57, 175-211. [DOI:10.1017/S0020818303571077]
36. Manzoor, D. & Mostafapour, M. (2013). Reviewing Unfair Sanctions: Features, Objectives, and Fulfilled Measures. Quarterly Journal of Fiscal and Economic Policy, 1(2), 21-42.
37. Mimir, Y. (2016). On International Consumption Risk Sharing, Financial Integration and Financial Development. Emerging Markets Finance and Trade, 52(5), 1241-1258. [DOI:10.1080/1540496X.2015.1050927]
38. Mohammadzadeh Asl, N., Sabri Baghai, A., & Modirrousta, M. (2010). Investigating factors affecting foreign capital flows in developing countries. Quarterly Journal of Financial Economics (Financial Economics and Development). (5), 9-29.
39. Nguyen, H. (2014). Essays on International risk-sharing. University of Kansas, (Ph.D. Thesis).
40. Nier, E, Sedik, T.S & Mondino, T. (2014). Gross Private Capital Flows to Emerging Markets: Can the Global Financial Cycle be tamed? IMF Working Paper, WP/14/196. [DOI:10.5089/9781498351867.001]
41. Oliveira, T. M. (2019). The Impact of Capital Account Openness on International Risk-Sharing. Lisbon school of economics and management (Master Thesis).
42. Reinhart, C. M., Reinhart, V., & Trebesch, C. (2016). Global Cycles: Capital Flows, Commodities, and Sovereign Defaults, 1815-2015. The American Economic Review, 106(5), 574-580. [DOI:10.1257/aer.p20161014]
43. Rosenbaum, P. R., & Rubin, D. B. (1983). The Central Role of the Propensity Score in Observational Studies for Causal Effects. Biometrika, 70(1), 41-55. [DOI:10.1093/biomet/70.1.41]
44. Svirydzenka, K. (2016). Introducing a New Broad-based Index of Financial Development. IMF Working Paper, WP/16/5. [DOI:10.5089/9781513583709.001]
45. Tayebi, S. K., & Sadeghi, A. (2017). The effects of international sanctions and other influencing factors on the inflation rate in Iran. Journal of Economic Research, 52(3), 661-641.
46. Torki, L. & Mazaheri, B. (2022). The Effects of Financial Sanctions on Iranian Economy. Quarterly Journal of the Economic Research (Sustainable Growth and Development), 22(4), 69-98.
47. Vo, X. V. (2018). Determinants of capital flows to emerging economies - Evidence from Vietnam. Finance Research Letters, 27(C), 23-27. [DOI:10.1016/j.frl.2018.02.031]
48. https://home.treasury.gov/policy-issues/financial-sanctions/sanctions-programs-and-country-information. https://data.worldbank.org/.
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