Investigating the Impact of Iran-Turkey Preferential Trade Agreement on Investment in Iran: A Dynamic GTAP Approach

Document Type : Original Article

Authors

1 Ph.D. Candidate in International Economics, Faculty of Economics and Management, University of Tabriz, Tabriz, Iran

2 Assistant Professor of Economics, Faculty of Economics and Management, University of Tabriz, Tabriz, Iran

3 Assistant Professor of Economics, Faculty of Management and Economics, Shahid Bahonar University, Kerman, Iran

Abstract

Preferential trade agreements with major trade partners can play an important role in maintaining and deepening of current trade. The decision to invest is one of the key decisions in the field of economics and business. Turkey is one of Iran's important trading partners. This can lead to an increase in investment in Iran in order to attract foreign investors from Turkey to Iran, as well as lower the cost of imported inputs for domestic investors. This is especially important in the case of Iran. The present study intends to examine the effects of the trade agreement between Iran and Turkey (that is one of Iran's most important trading partners) on the amount of investment in agriculture, industry, and services since 2011- 2025 in Iran, so a preferential trade scenario for Iran is simulated according to the agreement. Preferential trade agreement between Iran and Turkey will facilitate trade relations, and this can lead to increased investment in Iran in order to attract foreign investors from Turkey, as well as lower the cost of imported inputs of domestic investors. The result of the agreement shows an increase in investment, and it is predicted that this investment will be made more in the production of industrial goods.

Keywords

References

- Adams, P.D., Horridge, M. & Wittwer, G. (2002). MMRF-GREEN: a dynamic multi-regional applied general equilibrium model of the Australian economy, based on the MMR and MONASH models. Draft Documentation Prepared for the Regional GE Modelling Course, 25–29. Centre of Policy Studies, Monash University.
- Akhbari, R., Jalaei, SA., Nejati, M., & Javadinia, M. (2019). Investigating the Impact of International Agreements on Environmental Quality through Foreign Direct Investment Channel with CGE Model Approach: A Case Study of Borjam Agreement. Economic Research, 54(4), 819-787 (In Persian).
- Arbab, H.R. (2001). Iran's economic benefits from the expansion of trade relations with ECO countries. PhD Thesis, Faculty of Economics, Allameh Tabatabaei University (In Persian).
- Ayoki, M. (2013). Trade Policies and Poverty in Uganda: A Computable General Equilibrium Micro Simulation Analysis. MPRA Paper 80327, University Library of Munich, Germany.
- Bagheri, F. (2014). Investigating the effect of exchange rate shocks on investment and employment with the approach of computable general equilibrium model in several regions, Master Thesis, Shahid Bahonar University of Kerman (In Persian).
- Barfisher, M. (2013). An Introduction to Computable General Equilibrium Models. translated by Fatemeh Bazazan, Tehran. (In Persian)
- Bchir, M.H., Decreux, Y., Gurin, J.-L., & Jean, S. (2002). MIRAGE, A Computable General Equilibrium Model for Trade Policy Analysis. Working Papers 2002-17, CEPII.
- Bhagwati, J. & Panagariya, A. (1996). Preferential Trading Areas and Multilateralism: Strangers, Friends or Foes? Papers 9596-04, Columbia - Department of Economics.
- Brockmeier, M., (2001). A Graphical Exposition of the GTAP Model. GTAP Technical Paper, No. 8.
- Ca'Zorzi, M., & Rubaszek, M. (2012). On the empirical evidence of the intertemporal current account model for the euro area countries. Rev. Dev. Econ, 16 (1), 95–106.
- Shaohua, C. & Ravallion, M. (2004). Welfare Impact of China Accession to the WTO. The World Bank Economic Review, 18(1), 29-57.
- Codsi, G., Pearson, K.R., Wilcoxen, P.J., (1992). General-purpose software for intertemporal economic models. Comput. Sci. Econ. Manag. 5 (1), 57–79.
- Database of Statistics Center of Iran, Central Bank and Customs of the Islamic Republic of Iran (In Persian).
- Dixon, P., Parmenter, B., Sutton, J., Vincent, D., (1982). ORANI: A Multisectoral Model of the Australian Economy. Contributions to Economic Analysis, vol. 142. North Holl and Publishing Company, Amsterdam.
- Edgeworth, F.Y. (1894). Competition And Custom. In R. H. Palgrave (Ed) Dictionary of Political Economy, London: Macmillan & Company.
- Elena, I. & Terrie, L.W. (2012). Dynamic-modeling-and-applications-for-global-economic-analysis. Cambridge University Press.
- Fisher, W.H., (2005). Current account dynamics in a small open-economy model of status seeking. Rev. Int. Econ., 13 (2), 262–282.
- Greenway, D., Morgan, W. & Wright, P. (2002). Trade liberalization and growth in developing countries. Journal of Development Economics, 67, 229-244.
- Ha, P.V., & Kompas, T. (2016). Solving intertemporal CGE models in parallel using a singly bordered block diagonal ordering technique. Econ. Model. Part A 52, 3–12, (Special Issue on Recent Developments in Decision-Making, Monetary Policy and Financial Markets).
- Ha, P.V., Nguyen, H.T.M., Kompas, T., & Long, C.H. (2017). Building a better trade model to determine local effects: A regional and intertemporal GTAP model. Economic Modelling, 67, 102–113.
- Harrison, W.J., & Pearson, K. R. (1998). An Introduction to GEMPACK. GEMPACK Document No. GPD-1 (4th ed.). Melbourne, Australia: Centre of Policy Studies and Impact Project, Monash University.
- Hertel, T.W. (1997). Global Trade Analysis: Modeling and Applications. Cambridge University Press, Cambridge, New York.                                          - Horridge, M. (2003). ORANI-G: a generic single-country computable general equilibrium model. Edition prepared for the Practical GE Modelling Course, June 23–27, 2003. Centre of Policy Studies and Impact Project, Monash University, Australia.
- Johnson, H.G. (1953). Optimum Tariffs and Retaliation. Review of Economic Studies, 21(2) 142-153.
- King, R.G., & Wolman, A.L. (1996). Inflation targeting in a St. Louis model of the 21st century. Federal Reserve of St. Louis Review, 78(3), 83-107.
- Lipsey, R. (1958). The Theory of Customs Unions: A General Equilibrium Analysis. London School of Economics and Political Science, PhD Dissertation.
- Limão, N. (2006). Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States. The American Economic Review, 96(3), 896-914.
- Mahmoudi, A. (2015). Global Trade Analysis Project (GTAP). Islamic Azad University, Mahabad Branch (In Persian).
- Mahmoudi, A. (2014). The effects of economic convergence of ECO member countries in a standard model of general equilibrium (GTAP, Quarterly Journal of Economic Research and Policy, 70, 5-30 (In Persian).
- Mahdi Portmali, F. (2005). Evaluation and Determination of Iran's Bilateral Trade Capacities with the Member States of the Preferential Trade Agreement of the Organization of the Islamic Conference. Quarterly Journal of Business Research, 36, 139-107 (In Persian).
- Marzban, H., & Nejati, M. (2012). The Effect of Foreign Direct Investment Overflow and the Role of Ability to Attract Domestic Enterprises in the Industrial Sector: The Case of Iran (1997-2007). Quarterly Journal of Economic Research, 47(4), 219-201 (In Persian).
- Mc Dougall, R., Walmsley, Z.A.T., Hertel, T. & Villoria, N. (2012). General Equilibrium Mechanisms and Real Exchange Rate in the GTAP Model. Third Draft of a Technical Document November, 1-40.
- McKibbin, W.J., & Sachs, J.D. (1991). Global linkages: Macroeconomic Interdependence and Cooperation in the World Economy. Brookings Institution, Washington, DC.
- McKibbin, W.J., & Wilcoxen, P.J. (1999). The theoretical and empirical structure of the GCubed model. Econ. Model, 16 (1), 123–148.
- Mill, J.S. (1844). Essays On Some Unsettled Questions of Political Economy. London, Parker.
- Najjari, J. (2012). Simulation of a computable general equilibrium model for trade reform and poverty in the Iranian economy. M.Sc. Thesis, Zabol University (In Persian).
- Nejati, M. (2012). Evaluation of the effects of foreign direct investment on the Iranian economy using a computable general equilibrium model. PhD thesis, Shiraz University (In Persian).
- Nejati, M., Bahmani, M., Jalaei, A., Balaghi Inalu, Y. (2020). Analysis of the effects of trade liberalization with a multi-regional computable general equilibrium model approach (Case study: Iran and members of the Eurasian Economic Union). Economics and modeling, 11(1), 153-179 (In Persian).
- Pirayeh, I. (2016). Feasibility study of creating economic convergence between Iran, China, India, Russia and Turkey. Master Thesis, University of Tehran, (In Persian).
- Qarabaghian, M. (1997), Money Demand and Income Distribution (1959-1993). Quarterly Journal of Planning and Budget, 15, 3-12 (In Persian).
- Rahimi Boroujerdi, A. (2010). Globalization. University of Tehran Publishing Institute (In Persian).
- Rahimi Boroujerdi, A. (2006). Economic convergence, preferential regional trade arrangements and common markets. organization of study and compilation of university humanities textbooks (samt) (In Persian).
- Raisi, Z. (2010). Feasibility study of establishing regional trade arrangements among the countries of Mena region. Master Thesis, Faculty of Economics, University of Tehran (In Persian).
- Ravalion, M. (2006). Looking Beyond Averages in the Trade and Poverty Debate. World Development. 34, 1374-1392.
- Rutherford, Thomas. (2005). Poverty Effect of Russia’s WTO Accession: Modeling Real Household and Endogenous Productivity Effects. World Bank Policy Research Working Paper.
- Salvatore, Dominick. (2013). International Economics. 11th ed, the US of America: Fordham University.
- Seung J.K. (2013). Trade Complementarity between South Korea and Her Major Trading Countries: Its Changes Over the Period (2005-2009). World Review of Business Research, 447, 370-380.
- Shaghaghi Shahri, V. (2017). Economic, Regional Integration and Its Impact on Foreign Direct Investment. Quarterly Journal of Business Research, 84, 63-27.
- Summers, L. (1991). Regionalism and the World Trading System. In Policy Implications of Trade and Currency Zones, Federal Reserve Bank of Kansas.
- Tayebi, S.K. & Mesrinejad, S. (2007). Commercial Liberalization of the Agricultural Sector and the Application of Computable General Equilibrium Models: A Study of Iranian Households. Quarterly Journal of Economic Studies, 1, 23-5 (In Persian).
- Torrens, R. (1833). Letters on commercial policy. London: Longman.
- Trefler, D. (2004). The Long and Short of the Canada-US Free Trade Agreement. The American Economic Review, 94(4), 870-895.
- Wendner, R. (1999). A calibration procedure of dynamic CGE models for non-steady state situations using GEMPACK. Comput. Econ., 13 (3), 265–287.
- Winters, L.A., McCulloch, N. & McKay, A. (2004). Trade Liberalization and Poverty: The Evidence So Far. Journal of Economic Literature, XLII: 72-115.
- Xinshen, D., Peter, H., Danielle, R & James, T. (2003). The Role of Agriculture in Development Implications for Sub-Saharan Africa. International Food Policy Research Institute. Research reports, 153, 1-74.
- Xiaohe, L., Fang, L., & Hongye, Y. (2007). Agricultural Trade Liberalization and Poverty in CHINA: Linked CGE Model Analysis. Presentation at IATRC Conference Held in Beijing China on July 7-9th.

Files

Share

How to cite

Statistics