The Bulletin of the Institute of Economics of the Russian Academy of Sciences № 2/2024.  Finance.

Vladislav V. Rychkov

Cand. Sci. (Econ.), Assistant Professor of the Department of Finance, Credit and Exchange Business of the Perm State National Research University, Perm, Russia

ORCID: 0000-0002-0869-8218

ANALYSIS OF THE IMPACT OF THE SANCTIONS NEWS ON RUSSIAN FINANCIAL MARKETS

71-115

2.38 MB

Full text

Abstract

The study presents a hypothesis that real-time news about the planned introduction of sanctions, adversely affects financial markets comparable to de facto imposed sanctions. The research focuses on quantitative evaluation of the relationship between news about sanction plans, their actual implementation, and the subsequent reaction of the currency, stock, and credit markets in Russia. The hypothesis that sanctions news has a negative impact, regardless of sentiment analysis, is confirmed. These news items act as a driving force for market changes, irrespective of the imposition of sanctions. Based on the calculations, the author reaches the following conclusions: 1) Western sanctions are no longer targeted and selective but aimed at maximum restriction of economic ties. 2) The non imposed sanctions of the study demonstrate that news about sanction plans alone has a negative impact and acts as a market-driving force independent of their implementation. The study utilises the Sanctions News Index (SNI), developed to assess the impact of news about sanctions on the Russian financial markets. The Granger method confirms the causal relationship between sanctions news and financial markets as measured by the SNI index. The significance of the sanctions factor, as measured by the SNI index, and its influence on the exchange rate of the Russian ruble is confirmed by constructing a regression model with this indicator as one of the independent variables. A proposed methodology has successfully identified the most impactful sanctions and evaluated their effects on financial markets. This was accomplished by performing quantitative content analysis on the SNI index. This work can be valuable for assessing the impact of sanctions on investment decision-making, and risk management, and understanding the overall mechanism, i.e., how news about potential or actual sanctions affect the economies of entire countries or regions.

Keywords: Russia, trade sanctions, news about trade sanctions, Russian ruble, the impact of trade sanctions, assessment of the impact of trade sanctions on the foreign exchange market, assessment of the impact of trade sanctions on the stock market, assessment of the impact of trade sanctions on the credit market.

JEL: F51, F52, F62

EDN: YKILCZ

DOI: https://doi.org/10.52180/2073-6487_2024_2_71_115

References

1. Altukhov A.V., Bannikova V.A., Matveev E.O., Tishchenko S.A. Assessing the impact of international sanctions on sectors of the Russian economy using the network modeling method // Economics and Management. 2020. No. 26 (3). Рp. 306–314. (In Russ.). DOI: 10.35854/1998-1627-2020-3-306-314.
2. Afontsev S.A. Political paradoxes of economic sanctions // Journal of the New Economic Association. 2022. No. 3 (55). Рp. 193–198. (In Russ.). DOI: 10.31737/2221-2264-2022-55-3-10.
3. Laufer M.A. Globalization of financial markets at the turn of the millennium // Finance and Credit. 2000. No. 6 (66). (In Russ.).
4. Omelchenko A.N., Khrustalev E.Yu. Model of the sanctions intensity index (using the example of Russia) // National interests: priorities and security. 2018. T. 1. No. 1. 62–77. (In Russ.). DOI: 10.24891/ni.14.1.62.
5. Sanctions policy: goals, strategies, tools: a textbook. 3rd edition, revised and expanded / [comp. I.N. Timofeev, P.I. Chupriyanova, K.V. Trotskaya]; Russian International Affairs Council (RIAC). M.: NP RIAC, 2023. (In Russ.).
6. Sokolov N.A., Larin S.N., Khrustalev E.Yu. Quantitative assessment of the impact of sanctions on the Russian economy in the short term // National interests: priorities and security. 2016. No. 8 (341). (In Russ.).
7. Fedorova E.A., Musienko S.O., Demin I.S., Fedorov F.Yu., Afanasyev D.O. The influence of news coverage of Russia in the media on export-import activity // Questions of Economics. 2019. No. 8. Рp. 30–44. (In Russ.). DOI: 10.32609/0042-8736-2019-8-30-44.
8. Fedorova E.A., Khrustova L.E., Demin I.S. The influence of news tone on the credit market during the period of sanctions. (In Russ.). DOI: 10.33293/1609-1442-2021-1(92)-97-116.
9. Askari Hossein G., Forrer John, Teegen Hildy, Yang Jiawen. Economic sanctions. Praeger, 2003.
10. Bali M., Rapelanoro N. International Economic Sanctions: Multipurpose Index Modeling in the Ukrainian Crisis Case. Journal of International Economic Studies. 2020. Vol. 16. 3. Рp. 26–39. DOI: 10.31085/1814-4802-2020-16-3-26-39.
11. Bali M., Rapelanoro N. How to simulate international economic sanctions: A multipurpose index modelling illustrated with EU sanctions against Russia. International Economics. 2021. No. 168. Рp. 25–39. DOI: 10.1016/j.inteco.2021.06.004.
12. Bapat N.A., Heinrich T., Kobayash Y., Morgan T. Clifton. Determinants of Sanctions Effectiveness: Sensitivity Analysis Using New Data. International Interactions, 2013. DOI:10.1080/03050629.2013.751298.
13. Bapat N.A. Threat and Imposition of Economic Sanctions 1945–2005: Updating the TIES Dataset. Conflict Management and Peace Science, 2014.
14. Bastião Rita Maria Ribeiro. Mercado De Acções E A Sua Relação Com Expectativas / Stock Markets And Their Relationship With Expectations. Universidade de Aveiro, Departamento de Economia, Gestão e Engenharia Industrial, 2010.
15. Dai M. Timing the impact of sanctions on trade // Research Handbook on Economic Sanctions, 2021. DOI: 10.4337/9781839102721.00031.
16. Elliott R., Davi, K.L., Slatick, E. Process-experiential therapy for posttraumatic stress difficulties. In: L. S. Greenberg, J. C. Watson, G. Lietaer (Eds.). Handbook of experiential psychotherapy, 1998.
17. Fedorova E., Nevredinov A., Chernikova L. The Impact of Sanctions on the Capitalization of Russian Companies: The Sectoral Aspect. Journal of Corporate Finance Research. 2023. Vol. 17. No. 2. Рp. 50–67. https://doi.org/10.17323/j. jcfr.2073-0438.17.2.2023.50-67.
18. Friedman Benjamin M. Optimal Expectations and the Extreme Information Assumptions of ‘Rational Expectations’ Macromodels // Journal of Monetary Economics. 1979. Vol. 5.
19. Kahneman D., Tversky A. Prospect Theory: An Analysis of Decision Under Risk. Econometrica. 1979. No. 47. Рp. 263–291.
20. Kheirandish M., Rashidian A., Bigdeli M. A news media analysis of economic sanction effects on access to medicine in Iran // Journal of Research in Pharmacy Practice. 2015. Vol. 4. Pp. 199–205. DOI: 10.4103/2279-042X.167042.
21. Lacy D. A Theory of Economic Sanctions and Issue Linkage: The Roles of Preferences, Information, and Threats // Journal of Politics. 2004.
22. Lucas R.E. Expectations and the neutrality of money // Journal of Economic Theory. 1972. Vol. 4. Issue. 2. P. 103–124. ISSN 0022-0531. DOI: 10.1016/0022-0531(72)90142-1. Available at: https://www.sciencedirect.com/science/article/pii/0022053172901421.
23. Marinov N. An Elusive Statistic: Estimating the Relationship Between Sanctions and Success. UCLA International Institute, 10264 Bunche Hall, University of California, Los Angeles, CA 90095. February, 2005.
24. Miadzvetskaya Y., Challet C. Are EU restrictive measures really targeted, temporary and preventive? The case of Belarus. 2022. Vol. 6. No. 1. Р. 3. Europe and the World: A law review [20]. DOI: https://doi.org/10.14324/111.444.ewlj.2022.03.
25. Nye Joseph S. Bound to Lead: The Changing Nature of American Power. New York: Basic Books, 1990.
26. Pape Robert A. Why Economic Sanctions Do Not Work // International Security. 1997. Vol. 22. No. 2.
27. Rychkov V. Estimate of the Impact of Trade Sanctions on the Russian Financial Markets // Science and Global Challenges of the 21st Century – Innovations and Technologies in Interdisciplinary Applications / Ed. by E. Isaeva, Á. Rocha. Perm Forum 2022. Lecture Notes in Networks and Systems. 2023. Vol. 622. Springer, Cham. DOI: 10.1007/978-3-031-28086-3_70.
28. Rychkov V. Market Drivers of the Ruble Dollar Market // Science and Global Challenges of the 21st Century – Innovations and Technologies in Interdisciplinary Applications / Ed. by E. Isaeva, Á. Rocha. Perm Forum 2022. Lecture Notes in Networks and Systems. Vol. 622. Springer, Cham. DOI: 10.1007/978-3-031-28086-3_77.
29. Ukraine-Russia Conflict and Stock Markets Reactions in Europe [Electronic resource] / Das, B.C., Hasan, F., Sutradhar, S.R., Shafique, S.; Global Journal of Flexible Systems Management LLC. https://doi.org/10.1007/s40171-023-00345-0, 2023.
30. Veebel V., Markus R. At the Dawn of a New Era of Sanctions: Russian-Ukrainian Crisis and Sanctions // Orbis. 2016. Vol. 60. Pp. 128–139. DOI: 10.1016/J.ORBIS.2015.12.001.
31. Wallace Neil. Rational Expectations and the Theory of Economic Policy // Journal of Monetary Economics, 1976.
32. Wallerstein Immanuel. Geopolitics and Geoculture: Essays on the Changing World-System. Cambridge [England]; Melbourne, Australia; New York; Paris: Cambridge University Press; Editions de la Maison des Sciences de l’Homme, 1991.
33. Wallerstein Immanuel. The End of the World as We Know It: Social Science for the Twenty-First Century. Minneapolis: University of Minnesota Press, 1999.
34. Wallerstein Immanuel. The Politics of the World-Economy: The States, the Movements, and the Civilizations. Cambridge [England]; Melbourne, Australia; New York; Paris: Cambridge University Press; Editions de la Maison des Sciences de l’Homme, 1984.

Manuscript submission date: 05.02.2024

For citation:

Rychkov V.V. Analysis of the Impact of the Sanctions News on Russian Financial Markets// Vestnik Instituta Ekonomiki Rossiyskoy Akademii Nauk. 2024. № 2. Pp. 71-115. (In Russ.). https://doi.org/10.52180/2073-6487_ 2024_2_71_115  EDN: YKILCZ

  Creative Commons 4.0