Investigating the Effect of Monetary Treaty on Trade between Iran and Major Trading Partners

Minoo Kiani-Rad (), Reza Tehrani (), Akbar Komijani () and Mohammad Javad Iravani ()
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Minoo Kiani-Rad : Alborz Campus, University of Tehran
Reza Tehrani : University of Tehran
Akbar Komijani : Faculty of Economics, University of Tehran
Mohammad Javad Iravani : Faculty of Management, University of Tehran

Journal of Money and Economy, 2017, vol. 12, issue 2, 145-173

Abstract: In the present study, the effect of concluding and executing monetary treaties as well as membership of regional economic cooperation organizations (as a potential for using regional currency) on mutual exports between Iran and its 50 major trading partners during the period of 2000 to 2016 is investigated. The Generalized Commercial Gravity Model and Ordinary Least Square (OLS) regression of panel data with fixed effects are used. Countries' exports to each other are considered as dependent variables, and economic weight (log ratio of countries' GDP based on the purchasing power parity to each other), geographic distance between countries, real effective exchange rate and the degree of openness of the economy are independent explanatory variables. In addition, monetary treaties and the membership of the countries in the Asian Clearing :union:, in the Economic Cooperation Organization (ECO) and in the Organization of Islamic Cooperation (OIC) are considered as dummy variables. The results show a positive and significant relationship between monetary treaties and the volume of exports of countries to each other. Also, the coefficients of dummy variables are significant and negative, indicating the lack of potential for the use of regional common currency among 51 countries over the considered period.

Keywords: Currency; Swap Currency; Optimum Currency Area (OCA); Economic and Monetary Convergence; Exchange Settlements; Panel Data (search for similar items in EconPapers)
JEL-codes: C23 F10 (search for similar items in EconPapers)
Date: 2017
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