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

TL;DR

This study uses newspaper coverage to measure sanctions intensity and finds that sanctions significantly impact Iran's economy, causing currency over-reaction, inflation, and reduced growth, with notable social effects especially on women.

Contribution

Introduces a novel newspaper coverage-based measure of sanctions intensity to analyze their economic and social impacts on Iran.

Findings

Sanctions cause currency over-reaction and inflation.

Sanctions reduce Iran's economic growth from potential 4-5% to 3%.

Adverse effects on employment and education, especially for females.

Abstract

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.