[POLICY BRIEF] DEBT AND SANCTIONS

Following the invasion of Ukraine, financial sanctions were taken against Russia. For the first time in modern times, those sanctions included the freezing of foreign exchange reserves. This Policy Brief discusses the potential consequences on the international monetary and financial system. It projects that US sanctions on the Central Bank of Russia will not affect the dominant role of the dollar and the composition of global foreign exchange reserves. But it could change the behavior of emerging economies. They may reduce their dependence on reserves by limiting their exposure to financial shocks and partially restricting capital movements by closing their capital account.

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