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Traders’ War Against Trade Walls: Evidence from Import Prohibition in Iran

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  • Kowsar Yousefi

    (Sharif University of Technology)

  • Samad Alaamati

Abstract

While governments justify trade bans in terms of home protection and controlling currency crises, traders employ different circumvention tactics. We evaluate the impact of a substantial import prohibition policy in Iran since 2018 on the trade evasion. The prohibition was enforced after a currency crisis, led by sanctions, and banned the importation of more than 1300 HS8 products. Our methodologies are difference-in-difference (DiD) and event studies. Covariates like tariffs, value-added tax, and product trends are controlled. Findings indicate that the prohibition caused a substantial rise in evasion, with an estimate of about 20%. As a piece of advice to policymakers who aim to control the demand for foreign currency in a crisis, our results show that evasion neutralizes a considerable part of the prohibition. Though, other means of circumventions like misclassifications and barter informal trade have an additional role in neutralization, that could be measured in future studies.

Suggested Citation

  • Kowsar Yousefi & Samad Alaamati, 2024. "Traders’ War Against Trade Walls: Evidence from Import Prohibition in Iran," Working Papers 1717, Economic Research Forum, revised 20 Aug 2024.
    • Handle: RePEc:erg:wpaper:1717
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