The author uses a GVAR model to forecast the response of the global economy to Russian sanctions, and a continuation of the Russia-Ukraine War. She finds that the effects of sanctions on Russia and the unintended consequences for Saudi Arabia and European allies depend on the type of sanctions, i.e., whether they are trade sanctions targeting Russian oil production or financial sanctions targeting Russian GDP. The author also finds that sanctions targeting Russian oil flows are inflationary but have fewer unintended consequences for global equity markets. Financial sanctions are more effective, with fewer adverse implications for global inflation levels. The article’s analyses also indicate that possible Russian measures to preempt further Western sanctions by implementing trade embargoes of products including natural gas and oil of their own will be counterproductive for the Russian economy.
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