The imposition of severe economic and financial sanctions on Russia have had limited effects on global financial markets with the worst of the damage being limited to Russian markets.—Barron’s
Russia and the Rest of the World in 2020
What was Russia’s investment and saving in 2020?
Look at the data table, which describes the state of Russia’s loanable funds market in 2020. Investment was $355 billion, and gross national saving was $391 billion.
Did Russia borrow or lend in 2020? How much?
Because Russia’s saving exceeded its investment, Russia lent to the rest of the world in 2020. The amount Russia lent was $36 billion—the difference between investment and saving.
What economic and financial sanctions were imposed on Russia in 2022?
When Russia invaded Ukraine in February 2022, the United States, the European Union, and many other countries shut Russia out of the global economy by banning transactions in markets for money, finance, and many goods and services.
How did these sanctions change invest, saving, and the interest rate in Russia’s loanable funds market?
Click here to watch a short video that explains the answer.
Why did the sanctions have a limited effect on global financial markets?
To see why the sanctions have a limited effect on global financial markets, look again at the data table. First, measured by GDP, the Russian economy is only 1.8 percent of the global economy. (Russian GDP, $1,479 billion, is 1.8 percent of world GDP $84,972 billion.)
But second, the loss of investment opportunities in the rest of the world is a big deal for Russia and a pin prick for the rest of the world. Russia’s $36 billion of loans to the rest of the world is 9.2 percent of Russian saving but only 0.16 percent of global saving.
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