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Gravity Model: An Application to Trade between Iran and Regional Blocs

Author

Listed:
  • Amir Reza Soori

    (Ph.D. Student of Economics and Faculty Member of Institute for trade Studies and Research (ITSR))

  • Ahmad Tashkini

    (Ph.D. of Economics and Faculty member of Institute For trade Studies and Research (ITSR))

Abstract

In this paper we revisited the recent contribution study which examines the determinants of bilateral trade between Iran and Europe Union, ECO, GCC and ASEAN countries in the period 1995-2009, using a panel data approach. The findings indicate that Iran’ trade flows follow the Linder hypothesis, while the bilateral trade is associated with Heckscher-Ohlin- Samuelson theorem. Results show that geographical distance is negative and significant; trade will increase if the transportation costs decreases. We also introduce the economic dimension and income percapita; these proxies confirm the positive effects on bilateral trade. Our results also confirm the hypothesis that foreign direct investment (FDI) is positively correlated with the trade.

Suggested Citation

  • Amir Reza Soori & Ahmad Tashkini, 2012. "Gravity Model: An Application to Trade between Iran and Regional Blocs," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 17(1), pages 1-12, winter.
    • Handle: RePEc:eut:journl:v:17:y:2012:i:1:p:1
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    References listed on IDEAS

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    1. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-481, August.
    2. Harald Badinger & Fritz Breuss, 2008. "Trade and productivity: an industry perspective," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 35(2), pages 213-231, April.
    3. Horácio Faustino & Nuno Leitão, 2008. "Using the Gravity Equation to Explain the Portuguese Immigration-trade Link," Working Papers Department of Economics 2008/12, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    4. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
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    Cited by:

    1. Allah Morad Seif & Hossein Panahi & Davoud Hamidi Razi, 2017. "An Estimation of The Impact of Economic Sanctions and Oil Price Shocks on Iran-Russian Trade: Evidence from a Gravity- VEC Approach," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 21(3), pages 469-497, Summer.
    2. Faraji Dizaji, Sajjad & Jariani, Farzaneh & Najarzadeh, Reza, 2018. "Impact of sanctions on bilateral trade of agricultural products between Iran and MENA region and the EU countries," MPRA Paper 89438, University Library of Munich, Germany.
    3. Liudmila Popova & Ehsan Rasoulinezhad, 2016. "Have Sanctions Modified Iran’s Trade Policy? An Evidence of Asianization and De-Europeanization through the Gravity Model," Economies, MDPI, vol. 4(4), pages 1-15, October.

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