Work

Stock market responses to economic sanctions: Evaluating the roles of national reserves and financial market access

Year: 2024

Type: article

Abstract: Economic sanctions significantly influence stock market capitalization and have critical implications for the national economy. This study investigates the impact of economic sanctions on stock market capitalization, focusing on the roles of national reserves and financial market access in mitigating these effects, utilizing a sample of 87 countries from 2000 to 2021 and employing a two-step system generalized method of moments (GMM) approach to analyze panel data . The findings reveal that economic sanctions, including trade and financial sanctions, significantly reduce stock market capitalization. However, this negative impact diminishes over time as markets adapt. Moreover, higher national reserves and enhanced financial market accessibility can mitigate the adverse effects of sanctions. Case studies in Russia, Iran, China, and Ukraine further validate these results. This study refines economic models, such as the capital asset pricing model (CAPM) and country risk model (CRM), by including sanction intensity, national reserves, and financial market accessibility, offering valuable insights for policymakers and investors dealing with international sanctions.

Source: Borsa Istanbul Review

DOI: 10.1016/j.bir.2024.10.006

Authors: Ahmed Alwadeai, Nataliia Vlasova, Hadi Mareeh, Nadeem Aljonaid

Institutions: Central University of Finance and Economics, University of International Business and Economics, Shandong University, Qilu University of Technology, Qilu Institute of Technology

Language: English

Topic: Economic Sanctions and International Relations

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: gold

Estimated APC paid: $1,500