Financial Risk of the Country and its Impact on Iran's Bilateral Industrial Exports

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.