Empirical effects of sanctions and support measures on stock prices and exchange rates in the Russia–Ukraine war

Abstract

What are the effects of sanctions and economic support on stock prices and exchange rates during the Russia–Ukraine war? We address this question using a panel-vectorautoregressions (VAR) model incorporating data from 23 countries besides Russia and Ukraine, spanning from 02/01/2022 to 02/24/2023. Our analysis relies on a detailed database to capture the nuances of sanctions and economic support. The results are presented from three distinct perspectives: first, in relation to global economies; second, regarding Russia; and third, concerning Ukraine. The findings reveal that the overall impact of economic support provided to Ukraine is generally limited. In contrast, sanctions imposed by countries have minimal effects on the sanctioning country itself but can have significant consequences for the targeted nation. This is particularly evident when financial sanctions are implemented. However, it is important to note that such sanctions also exert effects on the opposing party in the war—in this case, Ukraine. Furthermore, if the sanctions originate from G7 or developed countries, the effects on Russia tend to be more pronounced.