Impact of political, financial and economic risks on smuggling goods in Iran

Background and Aim:

Goods smuggling as part of the informal economy reduces the incentive to invest in production and employment (productive business space) and has a negative effect on the economic development process of a society due to higher profitability. The quality of political, economic and financial institutions plays an important role in the expansion of smuggling, and the poor quality of these institutions, including political, economic and financial instability, causes uncertainty and ultimately diminishes the motivation of economic actors in formal economic activities; and this has received less attention in domestic research. Accordingly, studying the determinants of goods smuggling (risk factor) is of great importance in the social and political system of any society. Therefore, this study seeks to investigate the determinants of goods smuggling with emphasis on economic, political and financial risks of Iran based on the International Risk Index of the country (ICRG) during 1997-2017.

Concerning the purpose, this is a practical research, and research method is causal-analytical. Statistical population is seasonal data on goods smuggling in Iran during 1997-2017. The present research model is Vector Autocorrelation (VAR) which has been estimated using Eviews 9.5 software. In this model, analysis of instantaneous reaction functions and prediction error variance analysis have been studied.

Results obtained from the immediate reaction test show that over a period of 10 years, with the shock of economic, political and financial risk variables, goods smuggling has been declined, but the effect of unemployment rate and Gini coefficient on smuggling has been positive and has an increased trend. Finally, the analysis of variance of the research indicates that the variables of smuggling, Gini coefficient, unemployment rate, political risk, economic risk and financial risk had the most effect on the goods smuggling, respectively.