On Wars, Sanctions and Sovereign Default
Working Paper 29989
DOI 10.3386/w29989
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This paper explores the role of restrictions on the use of international reserves as economic sanctions. We develop a simple model of the strategic game between a sanctioning (creditor) country and a sanctioned (debtor) country. We characterize how the sanctioning country should impose restrictions optimally, internalizing the geopolitical benefits and the potential losses of a default by the sanctioned country.