Growth Under Pressure : Assessing the Economic Impact of Sanctions on Target and Sender States

This study investigates how economic sanctions affect growth in both target and sender countries. The thesis is based on models such as the Swan-Solow model, Lucas' endogenous growth model, and the convergence theory to analyze how sanctions can function as external shocks to economies. Particular emphasis is placed on asymmetries between sanction-imposing and sanctioned states. As an empirical tool, a weighted sanctions index is constructed using data from the Global Sanctions Database. Several linear regressions are conducted using panel data ranging from 2003–2023. The panel structure enables analysis of both absolute effects and cross-country comparisons. The results show that sanctions, and in particular financial sanctions, have a negative and statistically significant effect on growth. At the same time, an asymmetric effect is observed, where sender countries tend to be affected less severely by a rising global sanction index, or not at all. The human capital index exhibits an unexpectedly weak effect, which is discussed in relation to potential measurement issues. This thesis contributes to the field by integrating growth theory with a new sanctions index and highlighting the nuanced effects of different types of sanctions. The conclusions are relevant for both economic policy and international decisions regarding the design of sanctions.