3. Sanctions to Russia. The exclusion from the SWIFT network has been imposed as a sanction to Russia for the invasion o

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3 Sanctions To Russia The Exclusion From The Swift Network Has Been Imposed As A Sanction To Russia For The Invasion O 1 (97.53 KiB) Viewed 52 times

3. Sanctions to Russia. The exclusion from the SWIFT network has been imposed as a sanction to Russia for the invasion of Ukraine. Consider the set of equations: rVo = a () (V1 - V0) - OZ, (S.) rV1 = Burt max 7R(VR-V1) + (1 - 0) Bupr max AF(VF - Vi), (S.R) TR F rVR=-YR () + BuizIIR(U+V0 – VR), (S.m) TRAF rVp = yF ()+max TR4F (VR-ER4F(0)-VF)+(1-TRAF) (1 - 0) Buicllr(U-ERAF()+V0-VF), (S.d) which define the value functions of being at state 0 (production), state 1 (commodity seller), state R (Ruble trader - commodity buyer), state F (foreign currency trader - commodity buyer). Notation and assumptions are similar as in the lecture. TIf there are no sanctions, 0 = 0, or if there are sanctions, = 1. Sanctions reduce the probability of production as supply chain disruptions may delay intermediate goods. The parameter Z captures supply chain costs to producers. The disruptions to trade increase inflation, i.e. the negative dividend on the Ruble – yr (0), and deteriorates the exchange rate of the ruble ERAF(). Draw the graphic dynamic structure of the equations above before the sanctions and after the sanctions. Describe the effect of the sanctions (according to the equations) and how it affects the the welfare of the agents in the economy.