The economic effect of Russia imposing a food embargo on the European Union with Hungary as an example
In the summer of 2014, Russia imposed a food embargo on most agricultural products from countries that supported the anti-Russian sanctions. In this study we use vector autoregression and neural network modelling to assess the eff ect of the embargo on the bilateral trade relations between the European Union (EU) (using the example of Hungary as an EU Member State) and Russia. In particular, the changes in the dynamics of Hungary’s aggregate agricultural exports in response to the shock of the embargo, as well as to Russia’s imports of products banned under the embargo, are analysed. The work also looks at the eff ectiveness of the introduction of the embargo with the aim of implementing import substitution policies and supporting domestic producers. Our results show the ineff ectiveness of the Russian import substitution policy and the negative eff ects on both Russian and Hungarian parties.