Working Paper

Identifying the Effects of Sanctions on the Iranian Economy Using Newspaper Coverage

Dario Laudati, M. Hashem Pesaran
CESifo, Munich, 2021

CESifo Working Paper No. 9217

This paper considers how sanctions affected the Iranian economy using a novel measure of sanctions intensity based on daily newspaper coverage. It finds sanctions to have significant effects on exchange rates, inflation, and output growth, with the Iranian rial over-reacting to sanctions, followed up with a rise in inflation and a fall in output. In absence of sanctions, Iran’s average annual growth could have been around 4 - 5 per cent, as compared to the 3 per cent realized. Sanctions are also found to have adverse effects on employment, labor force participation, secondary and high-school education, with such effects amplified for females.

CESifo Category
Fiscal Policy, Macroeconomics and Growth
Trade Policy
Keywords: newspaper coverage, identification of direct and indirect effects of sanctions, Iran output growth, exchange rate depreciation and inflation, labor force participation and employment, secondary education, and gender bias
JEL Classification: E310, E650, F430, F510, F530, O110, O190, O530