The Impact of Common Currency on Trade in Islamic Countries during 1990-2010

The economies of Islamic countries have always under been the influence of trade and its effective factors. But so far, there has not been any comprehensive study concerning the effects of common currency on Islamic countries trade. This paper attempts to investigate the effects of common currency on the 49 members of the Organization of Islamic Cooperation (OIC) based on Gravity Model during 1990-2010. The results showed that the common money based on Gravity Model is justifiable due to the fact that a set of pull and push factors such as common border GDP exchange rate volatility, trade agreement, countries’ distance and common currencies in the OIC countries would determine the flow of trade among the Islamic countries. Generally, factors such as GDP, common border, the existence of trade unions and common money are recognized to have significant positive effects on the flow of trade among the Islamic countries, while other factors such as exchange rate volatility and countries distance have significant negative effects on the flow of trade amongthe Islamic countries.