An Analysis for Creation of a Trade Block between Selected Middle-East Countries (An Application of Economic Convergence)

Middle East is one of the important regions in the world and this importance is strategic because of matters such as the volume of oil reserves and its production in this region. But there is a visible lack of an intensive Regional Trade Agreement in the region that if existed, could give rise to economic convergence between the countries of the region. So it seems useful to examine the effects of creating a hypothetical economic agreement in Middle East. For this purpose, this paper is an attempt to analyze the consequences of membership in a regional trade agreement on trade flows between the countries of this region. The model used is an extended version of the Gravity model and the data was compiled across a number countries in Middle East over 2002-2009. The findings demonstrate that the creation of a Trade Block in Middle East region would be ineffective.