gravity model

Due to the great collapse of trade after the financial crisis of 2008-2009, attention to the role of country financial risk for exports has increased. The country's financial risk, as considered in this study, is a measure of the country's ability to meet its financial obligations on the international level. The main issue in this article is to determine the extent to which Iran's industrial exports are affected by the country's financial risk, and to identify its determining components in comparison to other traditional factors affecting exports. Therefore, panel data for the period from 2002 to 2022 have been used in the framework of the gravity model and the maximum likelihood Pseudo-Poisson (PPML) method. Econometric analysis does not confirm the role of Iran's country financial risk in the industrial export supply growth. However, the country's financial risk conditions of export destinations are statistically confirmed as one of the effective factors in Iran's industrial export growth. The remarkable point is that the country's financial risk conditions of export destinations have the most impact on Iran's industrial exports compared to other classic factors of the gravity model, such as the real exchange rate, common border, and GDP per capita of export destinations. Among the five determining components of the country's financial risk for export destinations, reducing current account risk, servicing debt, foreign debt risk, and international liquidity risk increase the demand for Iran's industrial exports. It is recommended that export companies and development institutions consider the country's financial risk criteria when selecting and identifying target markets.

Preferential and free trade agreements (PTAs/FTAs) have long been recognized as pivotal instruments for fostering international trade, driving economic growth and strategic development through the reduction of tariffs and the facilitation of goods and services exchange. This study investigates the impact of recent PTAs/FTAs between the Islamic Republic of Iran and the Eurasian Economic Union (EAEU), specifically focusing on trade relations with the Republic of Kazakhstan. The primary research question addresses whether these agreements have yielded a measurable increase in bilateral trade flows between Iran and Kazakhstan. Furthermore, the study aims to comparatively analyze the strategic trade dynamics between Iran and the EAEU, with a particular emphasis on Russia and Kazakhstan. To address these objectives, this research employs a gravity model to quantify the impact of the PTAs/FTAs on trade flows. Additionally, the trade complementarity index (TCI) is calculated to assess the potential for mutually beneficial trade. The empirical findings demonstrate a statistically significant positive effect of the agreements on bilateral trade. However, comparative analysis reveals that the TCI between Iran and Russia exhibits greater temporal stability than that between Iran and Kazakhstan, suggesting a potentially more robust and consistent trade relationship. Based on these findings, the study argues that to fully capitalize on its geographical advantages and strengthen strategic trade ties with the EAEU, particularly Russia and Kazakhstan, Iran must prioritize the diversification and expansion of its industrial exports. Further, substantial investment in trade and transportation infrastructure is crucial for enhancing connectivity and reducing transaction costs. Finally, establishing Iran as a regional grain hub can significantly bolster its position in regional trade networks. The implementation of well-defined and strategically oriented trade policies is essential for maximizing the benefits of these agreements and solidifying Iran’s role in regional trade dynamics.

In recent decades, bilateral and multilateral investment treaties have become key international legal tools to encourage foreign direct investment (FDI) by providing protections that attract foreign investors. Consequently, many developing countries enter into bilateral investment treaties (BITs) to boost FDI inflows. This study aims to investigate the impact of these treaties on FDI in developing countries, analyzing economic data from 21 developing nations from 2007 to 2022 through an attraction model. The findings indicate that BITs have a consistently positive and significant impact on FDI across all models, with a particularly strong effect observed among developing countries. Additional variables—including institutional quality, colonial ties, and a free trade agreement dummy variable—were added to the model. When a BIT is concluded, the host country provides foreign investors with a reliable institutional framework that may offer better investment protection than domestic institutions. In this context, BITs and domestic institutional quality appear to be substitutes, leading to an expected negative relationship. On the other hand, BITs can also serve as a signaling mechanism, indicating to foreign investors that the host country is committed to safeguarding their investments. To capture this effect, an interaction term between BITs and institutional quality was added to the model. This interaction variable is negative across most country pairs, indicating substitutability, but is positive and significant among pairs of developing countries, highlighting a unique dynamic in these contexts.

During the last three decades, the industrial export growth of the member countries of the Organization of Islamic Cooperation (OIC) has slowed down. The increase in the hidden exchange cost in the export of industrial goods through the country risk channel is known as one of the effective factors.In recent empirical studies, various factors affecting bilateral exports of OIC member countries have been introduced, but empirical studies that consider the effect of country risk on the flow of bilateral industrial exports are very limited.Therefore, the main purpose of the current study is to investigate the impact of country risk and its components, including economic, financial and political risk, on the industrial exports of member countries of the Organization of Islamic Cooperation. In order to achieve this goal, within the framework of the gravity model and the pseudo-Poisson maximum likelihood method (PPML), the significance of the relationship between country risk and its components on bilateral industrial exports of OIC member countries in trade with import partners was investigated. . In this study, panel data was used for the period from 2021 to 2002.The findings of this study show that the country risk of the member countries of the organization as well as their strategic objectives have a significant impact on the flow of bilateral industrial exports. This finding is also true based on each of the constituent components of country risk, including economic, financial and political risk. In addition, political risk has the greatest impact on the industrial exports of OIC member countries compared to other factors. It is suggested that the Organization of Islamic Cooperation and its related institutions present appropriate policies for the creation and development of political and economic risk insurance coverage.

This study aims at investigating the impact of bilateral investment treaties on foreign investment inflows into Iran from developed source countries. To achieve this purpose, the two common approach in foreign investment literature, that is, the gravity and knowledge-capital model has been used as the analytical framework of the study, as well as the pseudo-Poisson maximum likelihood method for the years 2002-2020. The results show that both gravity and knowledge-capital models provide an acceptable explanation of foreign investment inflows into Iran from developed countries. Except of Iran's real GDP, the main variables of the gravity model, that is, the geographical distance and real GDP of developed source countries are statistically significant and have the expected signs. All the main variables of the knowledge-capital model, including the difference between gross enrollment ratio in tertiary education of developed source countries and Iran (with a negative coefficient), sum of real GDP of developed source countries and Iran (with a positive coefficient) as well as Interaction of the difference between gross enrollment ratio in tertiary education of developed source countries and Iran and difference between real GDP of developed source countries and Iran (with a positive coefficient) are statistically significant and indicate that the foreign investment of developed countries in Iran is more horizontal than vertical. There is a positive and statistically significant relationship between bilateral investment treaties and foreign investment inflows into Iran from developed source countries in both gravity and knowledge-capital models. Finally, the sanctions imposed against Iran have reduced foreign investment inflows into the country.

Foreign investment has many positive effects on the host countries. Attracting foreign investment through technology transfer and increasing competitiveness in the business environment probably lead to increasing economic growth and reducing poverty. Developing countries have always been trying to attract more foreign investment by providing the necessary conditions and increasing their competitiveness. In this regard, the governments of these countries have used various initiatives such as signing bilateral investment treaties as a reliable tool to encourage and promote foreign investment. This study has been compiled with the aim of investigating the impact of bilateral investment treaties on foreign investment in Iran. To achieve this purpose, the gravity model approach and the panel data model in the period of 2002 to 2020 have been used. The results show that there is a positive and significant relationship between signing bilateral investment treaties and the attraction of foreign investment in Iran. Because the sanctions imposed against Iran foreign investment inflows to Iran have significantly reduced. In addition, there is a positive and statistically significant relationship between the variables of the existence of common language, as well as the real GDP of the home countries and the attraction of foreign investment in Iran

The negative consequences of financial crises require the attention of economic policymakers and decision making centers.Therefore, considering the importance of the subject, the present study has investigated the effects of global financial crises on the trade patterns of Iran and its partners during the years 1995-2018.The variables have been estimated in the framework of the gravity model using the pseudo poisson maximum likelihood method.The findings show that the Asian financial crisis (1997) has an effective role in reducing the volume of trade but this result is the opposite in relation to the American financial crisis (2007) ; Because instead of a threat, it has become an opportunity for the movement of business flows. In this situation, it seems that the difference in the intensity and type of impact of financial crises on trade patterns can be affected by the nature of the crisis or the region where the crisis started.

The present article aims to investigate the effect of economic sanctions on Iran's trade mix with its major trading partners with an analytical approach. The method used in this study is panel data, the software used is Eviewes 10, and the model considered in this research is the generalized gravity model, which investigates and analyzes the effect of independent variables on the share of trade during the period of 1371 to 1400. The variables examined in this research include gross domestic product, population, real bilateral exchange rate, distance and the virtual variable of sanctions in three types: weak (LIM), medium (MED) and strong (EXT). The results of the research show that the product of the GDP of Iran and its trading partners, the product of the population of Iran and its trading partners and the real bilateral exchange rate are 2.50, 0.37 and 2.04, respectively, which have a positive and significant effect on the share of trade. Also, the distance at the rate of 1.16 and the virtual variables of sanctions with low, medium and strong intensity respectively at the rate of 2.03, 3.30 and 4.007 have had a negative and significant effect on the share of Iran's trade and major trading partners

Economic and political convergence within a region offers numerous advantages to the constituent countries of that region. Given Iran's imperative need to bolster its trade relationships with other nations as a strategy to mitigate the economic sanctions it faces, this study places paramount significance on exploring the feasibility of enhancing Iran's economic convergence with the Black Sea Economic Cooperation Organization (BSEC). Situated at the crossroads of Asia and Europe, and historically associated with the Silk Road, this organization was established in 1992. The primary aim of BSEC is to foster cooperation among its 13 founding member countries, namely Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, North Macedonia, Russia, Romania, Serbia, Turkey, and Ukraine. The overarching goal is to promote peace, stability, and prosperity within the Black Sea region. To date, the Islamic Republic of Iran has engaged with the aforementioned organization in the capacity of a Sectoral Dialogue Partner (SDP). Collaboration between Iran and BSEC has encompassed a wide spectrum of domains, including but not limited to transportation, agriculture and related industries, banking and finance, combatting organized crime, culture, customs affairs, education, emergency aid, energy, environmental protection, statistical data and information exchange, healthcare and the pharmaceutical industry, information and communication technologies, organizational rejuvenation and good governance, science and technology, small and medium industries, tourism, trade, and economic development. Furthermore, several specialized working groups have been established to facilitate and oversee these collaborative efforts.

THEORETICAL FRAMEWORK:

The theoretical framework underpinning research concerning economic convergence finds its roots in the theory of customs unions. Esteemed economists such as Viner (1950) and Meade (1955) have made significant contributions to the development of this theoretical domain. Advocates of the theory of economic convergence contend that it offers a pathway for less developed nations to harness the benefits of larger markets and to attain economies of scale, thereby mitigating the constraints imposed by the limited size of their domestic economies. Furthermore, proponents of the economic convergence theory posit that, through this approach, smaller nations can bolster their standing within the global economy and enhance their appeal for attracting foreign and international capital investments.

METHODOLOGY:

To fulfill the objectives of this research, data spanning the period from 2010 to 2021 was gathered from authoritative sources including the World Bank, the International Monetary Fund, and the International Trade Center. Subsequently, the collected data underwent analysis utilizing the gravity model, with the STATA software serving as the analytical tool. Notably, in the 1960s, seminal work conducted by Tinbergen and Poyhonen marked the early application of the gravity model for the examination of international trade flows. Since that time, the gravity model has evolved into a widely adopted tool in the realm of international economic studies. Numerous researchers have employed this model to explore trade dynamics between nations. It is worth emphasizing that the utility of the gravity model extends beyond the analysis of trade patterns; it is also instrumental in the examination of regionalism. In essence, this model functions as a versatile tool, capable of simulating potential trade relationships within any form of integration program involving groups of nations.

The results of the analysis have revealed that certain categories of goods, identified by their two-digit customs tariff codes, hold particular promise for the development of trade relations between Iran and the countries in question. These preferred groupings are as follows: "27: Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes," "72: Iron and steel," "39: Plastics and articles thereof," "29: Organic chemicals," "08: Edible fruit and nuts; peel of citrus fruit or melons," "74: Copper and articles thereof," "76: Aluminum and articles thereof," and "84: Machinery, mechanical appliances, nuclear reactors; parts thereof," in respective order. Moreover, the findings highlight that economic integration between Iran and the BSEC countries exerts a positive influence on the overall trade volume originating from Iran and destined for BSEC nations. Specifically, it is observed that a one-unit increase in economic integration between Iran and the BSEC countries leads to a corresponding 0.24 unit increase in the total trade volume between Iran and the countries within the BSEC framework. Consequently, it is deduced that fostering economic integration between Iran and the BSEC countries is a viable prospect, one that is poised to yield an upsurge in the volume of trade between Iran and the aforementioned countries.

 CONCLUSIONS & SUGGESTIONS:

Based on the research findings, it is recommended that policymakers take proactive measures to enhance economic convergence between Iran and the Black Sea Economic Cooperation Organization (BSEC) as a strategy to mitigate the impacts of economic sanctions. This recommendation is underscored by the strategic importance of the Black Sea region, given its unique position at the crossroads of Asia and Europe, historically associated with the Silk Road. However, it is essential to acknowledge that the Black Sea basin is one of the most heterogeneous and intricate regions globally. This geographic area encompasses countries that exhibit substantial political, economic, military, cultural, and religious diversity. Consequently, any collaborative endeavors between Iran and the member nations of the Black Sea Economic Cooperation (BSEC) should be structured and adapted to account for these multifaceted and dynamic conditions and components.

The present study attempts to investigate the institutional factors affecting bilateral or multilateral investment treaties with regard to foreign direct investment. This is an applied research based on descriptive and correlational approach. In order to test the postulated hypotheses, given the availability of data, 42 countries were considered for the period 2006-2021, and the PPML technique was applied using Eviews 13 within the framework of the gravity model. The results showed that investment treaties have a positive and significant effect on foreign direct investment, although this effect will be greater in the case of developing countries. Factors such as common language, market capacity, and distance also have a significant impact, whereas population and geographic proximity are not significant determinants for the flow of foreign direct investment except for the paired developing countries. In general, the empirical investigation demonstrated that a bilateral investment treaty acts as a signaling device, indicating that the host country is serious about protecting the investment.

In order to realize development programs based on non-oil exports, copper exports can be considered as one of the important resources in the field of foreign exchange to the country. Therefore, in this study, for the first time, the degree of similarity for convergence and feasibility of copper exports to ECO in the period (2020-2016) is investigated. The results of the gravity model indicate that the gross domestic product of the destination country with the data panel (0.677) and the dynamic data panel with generalized torques (GMM) effect (0.566) have a positive relationship with the copper trade, respectively. Significant and the effect of distance with copper exports has been estimated to be negative and significant. Also, the export potential index showed that the highest export capacity of Iranian copper is related respectively to Turkey, Pakistan, Kazakhstan, Uzbekistan, Azerbaijan, Kyrgyzstan and Turkmenistan, Afghanistan and Tajikistan. The export capacity of Iranian copper to different countries of the ECO, which is of paramount importance to the potential of both turkey and Pakistan. Overall, the results of this study can be a very useful way for macro-planning to find the target markets for Iranian copper trade, especially in the group of ECO countries.

Paying attention to the importance of international trade, analyzing and recognizing the country's trade relations and examining its obstacles and incentives play an effective role in the path of economic development, because international trade affects the growth rate of the economy through access to foreign markets. Technology has played a significant role in shaping trade patterns, and there is a significant relationship between trade and technology in empirical literature. It is important to evaluate the effect of distance and technological gap as a variable that can play as an obstacle or an incentive for the country's trade relations. Therefore, the gap in technological progress can be one of the most important determining bilateral trade and economic growth between countries. In the present study, 43 trading partner countries of Iran, which had the most trade with Iran between 2001 and 2020, were selected, and the relationship between the technology gap and the industrial trade was estimated using the gravity model and Panel-ARDL regression. The results showed that the gravity model is in place in Iran's economy in the long term. Also, in the long term, the technology gap between Iran and the commercial side, based on the index of research and development costs, will lead to a decrease in the trade of the industrial sector of Iran and its commercial partners. reducing Iran's technology gap with trading partner countries, it increases industrial trade

Today, geo-economics strategies play a significant role in the global economy and new dimensions have been considered, including the distribution of energy resources and their trade movements. In this study, evaluating the factors affecting the volume of oil trade in the corridors in the current period and till 2040 perspective is sought through the gravity approach and using the panel data model in the period (2008- 2020). Reviewed oil trade flows of the area include: Middle East-Southeast Asia, Middle East-China, Middle East-Japan, Middle East-Europe, Middle East-India, Middle East-Singapore, Middle East-Africa, Middle East-Australia, Russia and CIS-India and Russia and CIS-Middle East. The required data were acquired from IEA, BP and WDI databases. The results obtained from this model reveal that the variables affecting oil trade between countries include the amount of GDP of the importing country, the share of oil in the energy consumption of exporting countries, and the share of oil in the energy consumption of importing countries. On the horizon of 2040, the Middle East-China oil trade is projected to rank first, the Middle East-Southeast Asia oil trade to be ranked second, and the Middle East-India oil trade to be ranked third.

The purpose of this study is to investigate the effect of trade and foreign direct investment on economic growth of OPEC members using the convergence and gravitation model. The model is estimated by the spatial Durbin regression model (SDM) using spatial panel data for the period 2010-2020. Convergence is estimated using cross-sectional data method and gravitation model using panel data method. The results show that foreign direct investment affects economic growth inside and in neighbor countries through spillovers, increasing trade and technology imports in the countries. Also the size of government has no effect on trade and economic growth. The results of convergence and gravitation model show that there is convergence between the target countries and gross domestic product has a positive effect on bilateral trade, but the Linder variable has a negative effect on mutual trade, consistent with the theory.

To Estimate the value of trade between countries, a differential gravity model of bilateral trade flows was formulated and estimated with panel data from 2009 to 2019 for each of the commodity groups HS68 (ceramic products, glass and glass products), HS69 (ceramic products) as well as HS70 (glass and glass products). The parameters were estimated with a large database using ordinary least squares, fixed-effects and random-effects methods. For the three commodity groups, the results were stable across methods. For HS68, exports were elastic with respect to the gross domestic product (GDP) of exporters and importers GDP. For HS69, exports were inelastic with respect to the exporters GDP and elastic with respect to importers GDP. Exports of HS70 were inelastic with the exporters GDP and elastic with respect to the importers. Results show that geographical distance and trade imbalance is negative and significant; trade increases if thetransportation costs decrease. We also introduce the economic dimension and income per-capita; these proxies confirm the positive effects in bilateral trade. To Estimate the value of trade between countries, a differential gravity model of bilateral trade flows was formulated and estimated with panel data from 2009 to 2019 for each of the commodity groups HS68 (ceramic products, glass and glass products), HS69 (ceramic products) as well as HS70 (glass and glass products). The parameters were estimated with a large database using ordinary least squares, fixed-effects and random-effects methods. For the three commodity groups, the results were stable across methods. For HS68, exports were elastic with respect to the gross domestic product (GDP) of exporters and importers GDP. For HS69, exports were inelastic with respect to the exporters GDP and elastic with respect to importers GDP. Exports of HS70 were inelastic with the exporters GDP and elastic with respect to the importers. Results show that geographical distance and trade imbalance is negative and significant; trade increases if thetransportation costs decrease. We also introduce the economic dimension and income per-capita; these proxies confirm the positive effects in bilateral trade.To Estimate the value of trade between countries, a differential gravity model of bilateral trade flows was formulated and estimated with panel data from 2009 to 2019 for each of the commodity groups HS68 (ceramic products, glass and glass products), HS69 (ceramic products) as well as HS70 (glass and glass products). The parameters were estimated with a large database using ordinary least squares, fixed-effects and random-effects methods. For the three commodity groups, the results were stable across methods. For HS68, exports were elastic with respect to the gross domestic product (GDP) of exporters and importers GDP. For HS69, exports were inelastic with respect to the exporters GDP and elastic with respect to importers GDP. Exports of HS70 were inelastic with the exporters GDP and elastic with respect to the importers. Results show that geographical distance and trade imbalance is negative and significant; trade increases if thetransportation costs decrease. We also introduce the economic dimension and income per-capita; these proxies confirm the positive effects in bilateral trade.To Estimate the value of trade between countries, a differential gravity model of bilateral trade flows was formulated and estimated with panel data from 2009 to 2019 for each of the commodity groups HS68 (ceramic products, glass and glass products), HS69 (ceramic products) as well as HS70 (glass and glass products). The parameters were estimated with a large database using ordinary least squares, fixed-effects and random-effects methods. For the three commodity groups, the results were stable across methods. For HS68, exports were elastic with respect to the gross domestic product (GDP) of exporters and importers GDP. For HS69, exports were inelastic with respect to the exporters GDP and elastic with respect to importers GDP. Exports of HS70 were inelastic with the exporters GDP and elastic with respect to the importers. Results show that geographical distance and trade imbalance is negative and significant; trade increases if thetransportation costs decrease. We also introduce the economic dimension and income per-capita; these proxies confirm the positive effects in bilateral trade.To Estimate the value of trade between countries, a differential gravity model of bilateral trade flows was formulated and estimated with panel data from 2009 to 2019 for each of the commodity groups HS68 (ceramic products, glass and glass products), HS69 (ceramic products) as well as HS70 (glass and glass products). The parameters were estimated with a large database using ordinary least squares, fixed-effects and random-effects methods. For the three commodity groups, the results were stable across methods. For HS68, exports were elastic with respect to the gross domestic product (GDP) of exporters and importers GDP. For HS69, exports were inelastic with respect to the exporters GDP and elastic with respect to importers GDP. Exports of HS70 were inelastic with the exporters GDP and elastic with respect to the importers. Results show that geographical distance and trade imbalance is negative and significant; trade increases if thetransportation costs decrease. We also introduce the economic dimension and income per-capita; these proxies confirm the positive effects in bilateral trade.

Economic sanctions in the field of international relations affect the trade pattern of countries. One of the effective channels of sanctions is exports (as the most important source of foreign exchange supply for countries). In this regard, oil exports to OPEC member countries, especially Iran, are among the most important economic revenues and have a high share in the country's budget. In the present study, the effect of sanctions on the pattern of trade in Iranian crude oil and petroleum products and also the effect of these sanctions on OPEC member countries in the framework of the generalized gravity model using panel data econometric models have been investigated. The research model is based on statistical data from 1988 to 2018 in the form of four periods of sanctions, including the first period of US sanctions, EU sanctions, UN sanctions, and the second period of US sanctions. The findings show that US-era sanctions and EU sanctions have had less of an impact on Iran's oil exports, but UN sanctions have had a significant impact on these oil exports and Iran's share of OPEC exports. According to research findings, other OPEC member countries have not had a significant impact on the replacement of the Iranian oil market, and this shortage has been mainly met by countries outside the OPEC.

According to Porter (1990) theory, countries go through different stages in the development path: the first stage is the export of raw materials and raw materials, the second stage is the export of industrial capital products, the third stage is the export of knowledge products and finally the class war for more wealth. . This paper examines the behavior of the development path through the trade of members of the Organization for Economic Co-operation and Development (EEC) in the form of the Global Attraction Model. This was done in separate estimates for ECO member countries separately for industrial and agricultural exports. The results indicate that the importance and impact factor of factors affecting industrial exports such as GDP, human capital and social capital for industrial goods is much higher and more than agricultural products and raw materials, and ECO members instead of focusing on achieving In the next stages of development, it is better to increase the accumulation of human and social capital.