By Robert Eyler (auth.)
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Extra resources for Economic Sanctions: International Policy and Political Economy at Work
Sender nations must identify and form compacts with target trading partners to minimize leakages. Trade and financial dependence is likely to be a function of a nation’s economic activity, driving international market availability and trade integration. 19 The elasticity of target demand for the sender’s goods is a reflection of how substitutable the sender’s goods are; the elasticity of the target’s supply of goods purchased by the sender reflects how many markets still exist if the sender embargoed the target’s exports.
11 Another type of financial sanction reduces or eliminates income flows from target assets currently held in the sender economy, essentially “freezing” the assets. If the target has used the sender’s financial markets as a proxy for its own, these sanctions can be quite detrimental. To restrict asset income flows to foreigners, the sender must have a certain precondition. A sender cannot credibly curtail target asset income if it is a net creditor of the target. It is likely that targets, once cut off from their own asset income flows, would retaliate in kind.
Each characteristic’s importance is debatable, subjects of many scholarly works. Derived from Galtung (1967), Knorr (1975), and Baldwin (1985), each characteristic was investigated in depth and breadth through the case analyses in HSE. The reader should think of these characteristics as independent variables in regressions, where the dependent variable is the measure of a sanction’s economic effects. Trade and Financial Dependence The more dependent the target economy is on sender trade, the more powerful the sanction should be ex ante.