The Effect of Economic Sanctions on the Volume of Trade of Iran with Emphasis on the International Trade of Goods

Document Type : Original Article

Authors

1 Assistant Professor, Economics Department, Faculty of Economics and Management, University of Sistan and Baluchestan, Zahedan, Iran

2 Assistant Professor of Economics, Faculty of Management, Economics and Accounting, University of Hormozgan, Bandar Abbas, Iaran

3 PhD Candidate in Statistics, Faculty of Mathematics and Computer Sciences, , Shahid Bahonar University of Kerman, Kerman, Iran

10.48308/jem.2024.236151.1928

Abstract

Economic sanctions are employed as a tool to exert pressure on the targeted country, imposing irreparable consequences on economies. So, it is crucial to examine these impacts and how to confront sanctions to mitigate the damage to the economy. The objective of this study is to investigate the impact of economic sanctions implemented based on the international commodity code by the United States, the United Nations Security Council, and the European Union on Iran's trade volume during the period of 1979-2020. One of the innovations of this research is deriving a quantitative index for the economic sanctions using the fuzzy hierarchical method. The fuzzy hierarchical method is a multi-criteria decision-making technique used to prioritize and evaluate factors under conditions of uncertainty and ambiguity. In this method, a decision tree is first formed, followed by the calculation of the sanctions’ consistency percentage. By employing fuzzy logic, data regarding the sanctions index was extracted, and the impact of these sanctions on the trade volume of the Islamic Republic of Iran was assessed based on the international commodity code using panel models. The findings indicate that the variables of exchange rate and inflation have a significant positive impact on the volume of non-oil exports. Furthermore, economic sanctions negatively and significantly affect the volume of non-oil exports, while both economic sanctions and the exchange rate have a negative and significant effect on the volume of imports in the Islamic Republic of Iran. Inflation also has a significant positive effect on import volume. It is therefore recommended that diversifying exports to other countries can help reduce dependence on markets restricted by sanctions. To this end, the development of domestic industries, the production of high value-added products, the promotion of non-oil exports, and the enhancement of trade relations with other countries are important.

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