Do Sanctions Backfire? New Evidence on the Macroeconomic Effects of Supporting Ukraine

Abstract

Using a balanced panel of 129 countries from 2000 to 2024, we estimate the macroeconomic costs of sanctions on Russia. To that end, we employ a novel two-wave common-correlated-effects imputation design that separates the 2014 sanctions from the 2022 escalation and accounts for heterogeneous exposure to global shocks. We find the main boomerang effect of these sanctions operates through prices rather than output. Specifically, relative to 2019-2021, we find a significant post-2022 increase in prices among sanctioning countries that remains robust under alternative counterfactuals, reference windows, and inference procedures. Conversely, we find no robust evidence of aggregate GDP-per-capita losses.