The impact of sanctions on the exchange pressure market among sanctioned countries (Iran and Russia)

Subject Areas : Monetary Economics

Mohammad Hassan Fotros ¹ , Maryam Mazhary Ava ^{2 *}

1 - Professor, Department of Economics, Faculty of Economics and Social Sciences, BU-Ali Sina University, Hamedan, [e-mail]
2 - Assistant Professor, Department of Economics, Saravan University, Sistan Baluchistan, [e-mail] (Corresponding Author)

Received: 2024-08-31 Accepted : 2025-02-02 Published : 2025-02-02

Keywords: ARDL, Sanctions, Exchange Pressure Market, Iran, Russia JEL Classification: .C40, D72, F31, N25,

Abstract :

The currency crisis is a critical issue faced by many countries, imposing significant pressure on their currency markets. This research investigates the impact of sanctions on currency market pressure in Iran and Russia using data spanning from 2000 to 2023 sourced from central banks. Employing the ARDL method, the study examines how sanctions influence exchange market pressure. For Russia, the short-term analysis reveals that sanctions initially negatively impact the foreign exchange market pressure. However, in the long term, the error correction results suggest that this negative effect diminishes in significance. Furthermore, economic growth and government spending both exert positive and significant effects on exchange market pressure in the short term. In Iran, the ARDL findings indicate a significant negative impact of sanctions on exchange market pressure. Economic growth, both in the short and long term, and government spending also exhibit negative and significant effects on the exchange market pressure. Interestingly, similar to Russia, the long-term impact of sanctions on Iran's economy appears not to be significant. Comparing the models for Iran and Russia, both countries experience a short-term negative and significant effect of sanctions on exchange market pressure. However, the long-term effects differ, with the significance of sanctions diminishing over time in both economies.