This dissertation studies topics in the areas of international finance. In the first chapter, the Unintended Consequences of Financial Sanctions, I study the economic impact of the U.S. financial sanctions against Russian companies in the aftermath of Russia's annexation of Crimea in 2014. I show that this sanctions program, which primarily cut off access to international financial markets for sanctioned firms, produced an unintended consequence of strengthening the sanctions targets relative to their unsanctioned peers. Specifically, while the policy successfully halted new international borrowings by sanctioned companies, the spillover impact of the policy resulted in these targets shrinking in size by less than unsanctioned Russian firms. To explain these results, I argue that sanctions led to a reallocation of domestic resources in favor of sanctioned firms. In particular, sanctions precipitated capital crowding out and credit rationing, causing unsanctioned domestic borrowers to suffer more from the policy. The research highlights the limitation of "targeted sanctions" and also sheds light more broadly on the impact of international financial integration and capital flows on firm size dynamics. In the second chapter, Quantitative Analysis of Sanctions Policy, I theoretically and quantitatively analyze the impact of financial sanctions on the target firms and the target economy. I introduce a heterogeneous firm model with segmented capital markets and financial frictions in which sanctions against international borrowers led to capital crowding out and credit rationing among domestic borrowers. I calibrate the model to the 2014 U.S. financial sanctions episode and use the model to estimate the impact of sanctions on firm sizes and macroeconomic variables. I also evaluate policy alternatives and identify factors for policymakers to consider in calibrating future sanctions programs. I conclude by discussing the 2022 sanctions program and inferring broader policy implications. In the third chapter, the Impact of Monetary Policy on the Specialness of U.S. Treasuries, I estimate the causal effect of monetary policy on the specialness of U.S. Treasuries. Quantifying this specialness by the U.S. Treasury Premium, which is the difference in the convenience yield of U.S. Treasuries and that of government bonds of other developed countries measured as the deviation from covered interest parity between government bond yields, I find that monetary tightening by the Federal Reserve increases the specialness of U.S. Treasuries primarily by increasing the convenience yield of U.S. Treasuries. I also find that the magnitude of the impact varies across the term structure and across countries, especially after the Global Financial Crisis, and U.S. and foreign monetary policy shocks have asymmetric impacts on the specialness of U.S. Treasuries. These results provide evidence for the unique ability of the Federal Reserve to affect the specialness of U.S. Treasuries by altering the supply of dollar safe assets.

This thesis explores the legal implications of sanctions on third country companies trading or operating with a sanctioned target state. Considering previous research – primarily from the disciplines of international business, international commercial law and economics – into international business under conditions of sanctions, we analyze the interplay of different sanctions and how they affect third country business. Based on our findings, we propose a model for third country trade in relation to sanctions and sanctioned markets. We conclude that, depending on how they are applied and implemented, sanctions and countersanctions can have contradictory and counterintuitive effects. Under conditions of sanctions, third countries can shield international business from increased political risk and uncertainty, and offer access to otherwise unavailable resources and advantages in sanctioned markets. However, even as third-country companies may be beyond the reach of extraterritorial sanctions, they must still grapple with a number of other effects of sanctions regimes. Such effects include significantly increasing transaction costs due to legal uncertainty, disruptions to supply chains, and being possibly locked out of sanctioning-state markets given noncompliance with sanctions. Depending on target country countermeasures, sanctions regimes may contribute to creating a situation in which third country company activities in a sanctioned state are effectively subsidized at the cost of companies adhering to the regulations of sanctioning bodies. These findings raise important questions for future research into international trade and commercial law.

An investigative research unraveling the implication of economic sanctions on Burmese women. This research was inspired by allegations in 2003 that thousands of women in Burma/Myanmar lost their jobs in the garment industry, thus exposing women to vulnerable aspects of forced migration and trafficking. A short case study of Iraq, Haiti, and Cuba is additionally provided while the history of economic sanctions and boycotts is heavily scrutinized. Perspectives of humanitarian law, human rights law, and feminist theory frame the basis of the research of which provide another critical dimension into the ongoing debate on economic sanctions.

Approved for public release; distribution is unlimited / Reissued 30 May 2017 with Second Reader’s non-NPS affiliation added to title page. / The United States has made use of economic sanctions to achieve political goals by limiting the relationship between trade, travel, and finance. However, economists are uncertain if the use of economic sanctions is effective and achieves the desired results. Applying the notion of demand-based inoperability, we present two nonlinear models to identify the optimal placement of sanctions and assess the sanctions' cascading effects to all sectors of an adversary's economy. For purposes of demonstration and validation, we pose a hypothetical scenario in which the U.S. considers trade sanctions on Canada. Specifically, our analysis proposes the Trade Sanction Inoperability Input-Output Model (TS-IIM). We devised this model to permit ranking of sectors by the order in which the greatest production loss occurs. Given the strong dependence of Canada on the United States, is it reasonable to expect that a sanction could result in economic repercussions? In response to this question, we also present the Inter-Country Inoperability Input-Output Model (IC-IIM), which extends the TS-IIM by considering the reduction in trade in value added (TiVA) the U.S. economy will experience. Our results from the TS-IIM and IC-IIM lead us to conclude that the proper design of a sanction considers not only the impact to an adversary's economy, but also sanction's associated repercussions at home. / Lieutenant, United States Navy

This paper surveys U.S. foreign policy in the late 1970s and early 1980s as the American administration reacted to the Soviet Union's interventions in Afghanistan and Poland and to its planned gas pipeline to Western Europe. Chapter I outlines the origins of the pipeline project; Chapters II and III describe U.S. foreign policy toward the Soviets during the Carter and Reagan administrations. Chapter IV focuses on the economic sanctions imposed against the Soviet Union by the United States and their failure to block or delay the pipeline, and Chapter V stresses the inability of economic sanctions-- in this and other instances--to achieve political ends.

La presente Tesi intende rispondere a tre domande di ricerca tra loro legate. La prima domanda ha l’obiettivo di studiare se il contributo dell’attività creditizia delle banche possa contribuire al rafforzamento del tessuto economico del Paese attraverso un impatto positivo sulla crescita del PIL. La seconda domanda ha l’obiettivo di stimare econometricamente una variabile proxy che esprima le risorse dedicate da ciascuna banca al controllo costante dei finanziamenti erogati, analizzandone il potenziale effetto sia sulla qualità del portafoglio prestiti delle banche sia sul grado di efficienza del processo bancario tradizionale stimato attraverso l’approccio parametrico della frontiera stocastica. La terza domanda ha l’obiettivo di studiare se una maggiore attività di monitoraggio bancario possa ridurre la probabilità di incorrere in sanzioni amministrative da parte della Banca d’Italia. Analizzando un panel bilanciato di 436 banche Italiane, nell’arco temporale 2000-2012, i risultati evidenziano: l’attività creditizia della banca, se di qualità, contribuisce alla crescita economica; l’intensità del processo di monitoraggio del credito rafforza la capacità di prevedere con anticipo futuri peggioramenti della qualità dei prestiti; una relazione positiva tra l’attività di monitoraggio e l’efficienza del processo produttivo bancario; una relazione negativa tra l’efficienza del processo produttivo bancario e le sanzioni amministrative comminate dalla Banca d’Italia. / The Thesis is based on three research questions. The first research investigates whether the lending growth, in the Italian banking system, could contribute to the economic growth and which banks (commercial, cooperative, mutual) show a more sustainable relationship with the economic environment. The second research develops a proxy based on labour input in the loan monitoring process. The proxy investigates: the resources devoted by banks to their loans monitoring activity; its influence on loans quality, its predictive aptitude in finding out anticipatory signals of credit quality worsening; its efficiency on the bank productive process. The third research analyses the relationship between the effective system of banking supervision (i.e., economic sanctions inflicted by the Bank of Italy) and the efficiency of the bank production process estimated through the stochastic frontier approach. Based on a balanced panel of 436 Italian banks, between 2000-2012, the results show: the lending growth may contribute to the economic environment; superior loan monitoring activity improves both future loan losses experience through the early detection and the management of problem loans; the monitoring activity increases the efficiency of the bank production process; the more economic sanctions are inflicted, the less the efficiency of the production process will be.

Fleets have the ability to affect an adversary’s use of the seas for transportation. Nations have in numerous occasions exercised this power in order to ravage their opponent’s trade in times of conflict with the purpose of diminishing their military might. Great naval thinkers like Mahan and Corbett have described this use of seapower during conflicts in great depth but theories regarding the use of seapower to affect a nation’s peacetime economy in order to achieve limited political goals is lacking. This thesis attempts to analyze the use of seapower in the form of economic sanctions to answer the question; “How is seapower exercised in economic sanctions?” in order to remedy this. The results show that seapower is mostly used to halt the inward flow of goods to a nation and general sanctions are more often used than sanctions targeting specific commodities. What these sanctions aim to achieve is often to limit military capacity and to disrupt military aggression. This thesis comes to the conclusions that a force capable of operating anywhere on the globe for an extended period of time is vital for the effectiveness of economic sanctions, seapower is a necessary part of the enforcement of economic sanctions and that naval theory has been too preoccupied with large scale conflicts and neglected the use of seapower to achieve limited political goals with economic measures during times of peace.

This thesis emphasizes the role of political risk in international business by analyzing the impact of political events on the valuation of firms. The guiding question is how governments interfere with the business interests of firms located in their own country as well as with the business interests of firms from other nations, as a consequence of the application of international sanctions. Therefore, the focus is on multi-country and multi-sector effects due to the occurrence of specific sanction events. The empirical methodology is the event-study approach, which analyzes stock market reactions to new information. The research objective is to detect abnormal stock returns across multiple markets and sectors, as a consequence of events related to the imposition of or threat of international sanctions. The empirical model of this thesis differentiates between risk-effects for firms located in the sender country (i.e., the origin of sanctions), for firms located in or specifically related to target countries (i.e., the receiver of sanctions) and firms located in third countries (i.e., countries not directly involved). There are three different cases analyzed: E.U. Economic Sanctions against African countries (2002-2005), the U.S. Steel Tariff (2002) and the Iran Sanctions Act (2007). The cases represent sanctions applied on the nationwide, sector- and firm-specific level. The event studies provide empirical evidence for the existence of political risk-effects due to sector-specific sanctions. Risk-effects are detected for firms in target countries and for firms in the sender country itself. The applied political risk framework describes how political risk affects multinational firm value and explains that it varies among firms. The impact of political risk on a firm's value depends on the risk exposure of a firm's individual business interests to it. This contributes a new perspective on political risk that emphasizes multinational and multi-sectoral effects and underlines that a specific political risk can be relevant for a variety of different international business interests. (author's abstract)

On Constate aujourd’hui une avancée significative du processus de démocratisation au Togo et au Zimbabwe grâce à la politique de la conditionnalité démocratique de l’aide européenne au développement et aux sanctions financières édictées contre ces pays. C’est la synergie des forces externes et internes qui a contribué au changement de politique au Togo et au Zimbabwe. La mobilisation de la société civile a également été utile. Cependant, le système politique produit par la politique de la conditionnalité n’est que de façade car les résultats obtenus ne sont pas à la hauteur des attentes. Le bilan est mitigé. Les réformes entreprises au Togo et au Zimbabwe ne sont qu’apparentes. La dépendance de l’aide a engendré la corruption, les dettes, et a sapé les investissements. Tant que des solutions appropriées n’auront pas été trouvées à l’aspiration démocratique des peuples africains en tenant compte de leurs réalités sociales, culturelles, économiques et politiques ; les crises sociopolitiques risquent de perdurer sur le continent. L’Afrique a besoin aujourd’hui d’une institution forte capable de concilier la démocratie et le développement. Elle a aussi besoin de l’indépendance budgétaire et monétaire. / Today there is a significant advance in the democratization process in Togo and Zimbabwe because of the political democratic conditionality for EU development aid and financial sanctions imposed against the country. It is the synergy of internal and external forces that contributed to the change in policy in Togo and Zimbabwe. The mobilization of civil society has been helpful. However, the political system produced by policy conditionality is only façade since the results are not up to what was expected. The results are mixed. The reforms undertaken in Togo and Zimbabwe are only apparent. In addition, aid dependence has fostered corruption, debt, and undermined investment. Unless appropriate solutions can be found to the democratic aspirations of the African peoples, taking into account their social, cultural, economic and political realities; sociopolitical crises are likely to persist on the continent. Africa today needs a strong institution capable of reconciling democracy and development. It also needs fiscal and monetary independence

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