Evaluation of the Effects of Political and Commercial Risks on Iran's Non-Oil Exports to the Main Export Destination Countries, with an Emphasis on Export Credit Insurance Subsidy

All forms of business contain elements of risk, but, when it comes to the international trade, the risk profile takes up a new dimension. Payment or non-payment delay of exported goods arises from two main types of risk, political and commercial risks. This study aimed to evaluate the effect of political and commercial risks of importing countries as well as the impact of governmental supporting policies for export credit insurance on Iran's non-oil exports to the main importing countries. Hence, a set of panel data was used on Iran’s non-oil export to 30 main export destinations. Also, statistics of political, financial and economic risk indices from the International Country Risk Guide (ICRG) for the period 1384 to 1391 were used to evaluate a gravity model.
Two static and dynamic algorithms of the gravity model were used. The static algorithm included static and Mundlak models for separating short-term and long-term effects. The random effects and the system-generalized method of moments (SGMM) approaches were applied to evaluate the static and dynamic models respectively. The results showed the political risk of importing countries has had a positive impact on Iran's non-oil exports in long term. In contrast, the commercial risks, namely economic risks and financial risks, have had a negative impact on Iran's non-oil export.
The study also showed the government has received taxes. This could have a positive effect on the non-oil exports of the country if the government granted subsidies to exporters through export credit insurance policies.