Assessment of IRAN’s International Trade Potential(A Gravity Model Analysis)

The paper attempts to examine IRAN’s trade potential with her 161 trading partners in 2011 by using an econometric gravity model and examine the gaps between potential and actual trade among member countries .The estimates reveal that among various variable, both the traditional variables (GDP per capita and distance) are found to be significant. Furthermore population, EU and EAEC countries dummy variables has a statistically significant impact on Iran’s bilateral trade flows. According to our estimation, Iran possess sufficient potential (on average) to expand its trade with 94 country. The maximum trade potential exists with Uruguay, Peru, Bosnia and El Salvador. Furthermore, Iran has approached the maximum trade levels with 67country such as Turkey, Venezuela ,Turkmenistan, Yugoslavia ,Congo and trade is upper than its potential; in other words, the potential is already exhausted.

International, Trade Potential, Augmented Gravity Model, Foreign Trade