Agricultural Economics and Development

Agricultural Economics and Development

Investigating Factors Affecting Agricultural Exchanges between Iran and Shanghai Cooperation Organization Member Countries

Document Type : Original Article

Authors
َAbolfazl Mahmoodi 1
Gholamreza Yavari 2
Saeid Yazdani 3
Farid Ejlali 4
yadollah azarinfar 5
1 Associate Professor of Agricultural Economics, Payam-e Noor University, Tehran, Iran.
2 Associate Professor in Economics, Yazd University, Yazd, Iran.
3 Professor of Agricultural Economics, University of Tehran , Tehran, Iran.
4 Associate Professor of Agriculture, Payam-e Noor University, Tehran, Iran.
5 PhD Student of Agricultural Economics, Payam-e Noor University, Tehran, Iran.
10.30490/aead.2025.366211.1606
Abstract
Introduction: Iran's membership in the Shanghai Cooperation Organization (SCO) has provided an opportunity for political, economic, and trade cooperation. The study aimed at examining the macro variables affecting exports and trade balance in the agricultural sector between Iran and SCO member countries (India, Kazakhstan, China, Kyrgyzstan, Pakistan, Russia, Tajikistan, and Uzbekistan) using the gravity model and panel data approach during 2003-2022.
Materials and Methods: The gravity model was employed to determine the effects of main variables on agricultural exports and trade balance between Iran and SCO member countries. Based on the results of Limer, Fisher and Hausman tests, the export pattern of Iran's agriculture was estimated using the fixed effects model, and the trade balance of Iran's agriculture was estimated using the two-way random effects model (cross-sectional and time). Research models were estimated using the Estimated Generalized Least Squares (EGLS) method.
Results and Discussion: The results indicated that the variables of Gross Domestic Product (GDP) of SCO member countries, the value added of Iran's agricultural sector, and the real exchange rate had significantly positive impacts on Iran’s agricultural exports to SCO member countries; in addition, the variables such as the price ratio of Iran’s agricultural exports to SCO member countries, fluctuations in the real exchange rate, and the Liner similarity index had significantly negative impacts on agricultural exports to SCO member countries. The estimation results of factors affecting the trade balance of Iran’s agricultural sector also showed that the GDP per capita of SCO member countries, the price of agricultural exports of member countries, and the price of Iran’s agricultural exports had significantly positive effects on the trade balance of Iran’s agricultural sector with the SCO member countries. Given the positive impact of the value added of Iran’s agricultural sector on Iran’s exports, it is important to plan for directing agricultural sector revenues towards the development of production and export infrastructure. It is also crucial to enhance the export regime towards countries where Iran’s export prices are lower compared to their import prices.
Conclusion and Suggestions: Based on the results, the following suggestions are proposed to enhance the agricultural exports and improve the trade balance of the agricultural sector of Iran with the Shanghai Cooperation Organization (SCO) member countries:

The Gross Domestic Product (GDP) of SCO member countries has a significantly positive impact on Iran’s agricultural exports to these countries. Therefore, the countries with higher income and increasing growth can be considered as potential markets for Iranian agricultural exports. It is essential to focus on expanding exports to the countries with lower income differentials with Iran (such as Pakistan, Uzbekistan, Kazakhstan, Tajikistan, Kyrgyzstan, Russia, India, and China).
Given the positive impact of the value-added of Iran’s agricultural sector on agricultural exports, planning to direct agricultural sector revenues towards developing production infrastructure is recommended. This highlights the role of improving agricultural production in reducing dependence on imports and expanding exports. Supporting production and farmers to facilitate and streamline the agricultural production cycle and strengthen the agricultural production infrastructure are emphasized. Price support policy, income support policy, and support policy for the development of agricultural processing industries can facilitate export planning and development.

The price ratio of Iranian agricultural exports to the SCO member countries also negatively affects Iran’s agricultural exports and trade balance with these countries. Therefore, initially, expanding export opportunities to the countries where Iran’s export prices are lower than their import prices is recommended. Subsequently, reducing the total cost of the product to lower Iran’s export prices can be pursued. For example, reducing transportation costs by selecting countries geographically closer to Iran is emphasized.
Keywords
Exports
Trade Balance
Gravity Model
Shanghai
Panel Data

Subjects

  • Asgari, M. (2019). Effective factors on Iran’s export to Eurasian Economic Union. Economic Modeling, 13(47), 77-102. [In Persian]
  • Babapour, M., Aliyev, I., & Seyed Nourani, S. M. (2022). The effect of GDP, price ratios and exchange rates in neighboring countries on Iran's agricultural exports. Economic Growth and Development Research, 12(48), 83-96. DOI: 10.30473/egdr.2021.60822.6308. [In Persian]
  • Baghestani, A. A., Javdan, E., Heydary, R., Shabanzadeh Khoshrody, M., Shemshadi, K., & Fahimifard, M. (2022). Islamic Republic of Iran and Shanghai Cooperation Organization (agricultural trade-food security). Publications of the Agricultural Planning, Economics and Rural Development Research Institute (APERDRI), Tehran, pp. 101. [In Persian]
  • Bahmani-Oskooee, M. (1991). Is there a long-run relation between the trade balance and the real effective exchange rate of LDCs? Economic Letter, 36, 403-407.
  • Balogh, J. M., & Borges Aguiar, G. M. (2022). Determinants of Latin American and the Caribbean agricultural trade: a gravity model approach. Agricultural Economics-Czech, 1-10. DOI: 10.17221/405/2021-AGRICECON.
  • Baltagi, B. H., Feng, Q., & Kao, C. (2012). A Lagrange multiplier test for cross-sectional dependence in a fixed effects panel data model. Journal of Econometrics, 170(1), 164-177.
  • Baltagi, B. H. (2008). Econometric analysis of panel data. Fourth Edition. John Wiley & Sons Ltd, Chic Ester.
  • Boisso, D., & Ferrantino, M. (1997). Economic and cultural distance in international trade: empirical puzzles. Journal of Economic Integration, 1, 456-484.
  • Chit, M., & Judge, A. (2009). Non-linear effect of exchange rate volatility on exports: the role of financial sector development in emerging East Asian economies. International Review of Applied Economics, 25(1), 107-119.
  • Daei Karimzadeh, S., Emamverdi, Gh., & Shayesteh, A. (2014). Investigating the effect of real exchange rate on Iran’s non-oil exports. Financial Economics, 8(29), 151-174. [In Persian]
  • Driscoll, J. C., & Kraay, A. C. (1998). Consistent covariance matrix estimation with spatially dependent panel data. Review of Economics and statistics, 80(4), 549-560.
  • Head, K. (2003). Gravity for beginners. Available at https://vi.unctad.org/tda/background/Introduction%20to%20Gravity%20Models/gravity.pdf.
  • ICCIMA (2021). Iran's membership in the Shanghai Cooperation Organization: implications for economic diplomacy. Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA), Research Center of Iran Chamber, Tehran. [In Persian]
  • Irwin, D. A. (1996). Against the tide: an intellectual history of free trade. Princeton University Press, New Jersey.
  • Ismaiel Ali Ismaiel, M., Zhou, D., Shawky Eladawy, R., El-Rasoul, A. A. E. Y. A., Tawfik Yousef Alkhateeb, T., Ali Ahmed Abdullah, T., & Mahmood, H. (2023). Determinants and potential of trade using the gravity model approach: empirical evidence of Egyptian rice crop, Complexity, 16, 4791707. DOI: 10.1155/2023/4791707.
  • Jannatabadi, N., Seyfi, A., & Feyzi, M. (2019). Investigating and comparing the impact of economic sanctions on Iran’s trade with eastern and western countries using the gravity model (1995-2016). Master's Thesis, Faculty of Management and Economics, Ferdowsi University of Mashhad, Mashhad. [In Persian]
  • Kazemnejad, M., Azizi, L., & Hosseini Amin, S. Z. (2021). Impact of the interim agreement between Iran and the Eurasian Economic Union in the development of trade between these countries. Agricultural Economics, 15(4), 61-93. DOI: 10.22034/iaes.2021.538892.1868. [In Persian]
  • Matinez, I., & Lehmann, F. (2003). Augmented gravity model: an empirical application to Mercosur-European Union trade flows. Journal of Applied Economics, 2, 291-316.
  • Mirqasem, F. B. (2006). Shanghai Cooperation Organization from the perspective of Russia. Translated by M. Zafarmand. Central Asia and the Caucasus Journal, 15(55). [In Persian]
  • Mitzo, T. (2010). Estimating gravity model of international trade correlated Tim-fixed regressors: to IV or not IV? Empirical Modelling in Regional Science, 65, 165-190.
  • Molayipour, M., Mahdavi Adeli, M., Lotfalipour, M., & Sabahi, A. (2019). Investigating the economic convergence of Iran and Russia. PhD Dissertation, International Campus, Ferdowsi University of Mashhad, Iran. [In Persian]
  • Mortazavi, S., Zamani, O., Noori, M., & Nader, H. (2011). Investigation of effect of exchange rate volatility on Iran’s pistachio export. Journal of Agricultural Economics and Development, 25(3), 347-354. DOI: 10.22067/jead2.v1390i3.10843. [In Persian]
  • Motevaseli, M. (2000). Commercial strategies and economic development (investigation of Iran’s special cases). Proceedings of the Second Annual Conference on Commercial Policies and International Trade. Institute for Trade Studies and Research. [In Persian]
  • Nejati, M., & Balaghi Inalou Y. (2022). Analysis of the interests of Iran's membership in the Shanghai Cooperation Organization: Computable General Equilibrium (CGE) approach. Quarterly Journal of Economic Research, 22(2), 89-118. [In Persian]
  • Nejati, M., Bahmani, M., Jalaee Esfandabadi, S. A., & Balaghi Inanloo, Y. (2021). The effects of trade liberalization on agricultural sector of Eurasian Economic Union and Iran: multi-regional computable general equilibrium approach. Agricultural Economics and Development, 29(3), 123-154. DOI: 10.30490/aead.2021.351973.1270. [In Persian]
  • Nengroo, T. A., Ahmad Shah, I., & Equbal, Md. S. (2023(. Determinants of bilateral agricultural trade of SAARC region: a gravity model approach). Statistika, 103(2), 216-225. DOI: 10.54694/stat.2022.40.
  • Pesaran, M. H. (2007). A simple panel unit root test in the presence of cross-section dependence. Journal of Applied Econometrics, 22, 265-312.
  • Pöyhönen, P. (1963). A tentative model for the volume of trade between countries. Weltwirtschaftliches Archiv, pp. 93-100.
  • Razini, E., Shahani, F., & Vojdani Tehrani, H. (2014). Survey of trade potentials between Iran and the member countries of Shanghai Cooperation Organization (SCO): the gravity model approach. Iranian Journal of Trade Studies, 18(69), 83-112. [In Persian]
  • Rezaei, A., Chizari, A., Mortazavi, A., & Mohammadzadeh, Sh. (2012). Investigation of effective factors on trade flows of Iran agricultural products and OIC countries. Agricultural Economics and Development, 20(2), 61-86. DOI: 10.30490/aead.2012.58728. [In Persian]
  • Shahabadi, A., Salmani, Y., & Valinia, S. (2017). Study of the agricultural market convergence in the D8 and G7 countries: gravity model approahs. Agricultural Economics Research, 8(32), 127-150. [In Persian]
  • Shishegari, T., Memarnejad, A., Ghaffari, F., & Hoseini, S. S. (2022). Impacts of sanctions on foreign trade analyzed with the gravity model approach: a case study of Iran and Russia. The Journal of Economic Policy, 14(27), 247-274. DOI: 10.22034/epj.2022.18064.2307. [In Persian]
  • Smith, A. (1776). An inquiry into the nature and the causes of the wealth of nations. The Glasgow Ed. of the Works and Correspondence of Adam Smith, Vol. 2, pp. 1-743.
  • Tabatabayi, S. A. (2011). A comparative study of the strategic approach of China, Russia, America, India, Pakistan and Iran to the Shanghai Cooperation Organization. A Quarterly Journal of Strategy, 20(60), 170-191. [In Persian]
  • Thomas, C. (2022). Iran sanctions. Congressional Research Service, February 02, 2022 (RS20871 - Version: 318).
  • Tinbergen, J. (1962). Shaping the world economy; suggestions for an international economic policy. Twentieth Century Fund.
  • Yousefi, K., & Sobhani, F. (2016). Evaluating the impact of preferential trade agreements on Iran’s market share. JPBUD, 21(1): 23-56. [In Persian]
  • Zamani, F., & Mehrabi Boshrabadi, H. (2014). The effects of exchange rate volatility on agricultural trade in Iran. Agricultural Economics Research, 6(22), 13-28. [In Persian]
  • Zargar Talebi, M., Mojaverian, S. M., & Sadeghi, S. (2016). Determinants of the intensity of intra-regional trade in agricultural products: a case study of ECO. Quarterly Journal of Trade Studies, 80, 151-171. [In Persian]
  • Zarif, M., Salarpour, M., & Karbasi, A. (2011). Trade evaluation of Iranian agricultural sector, using gravity model and panel data. Journal of Agricultural Economics and Development, 25(2), 192-199. DOI: 10.22067/jead2.v1390i2.9709. [In Persian]
  • Zolanvari Shirazy, S., & Farajzadeh, Z. (2023). Determinants of agricultural export and trade balance in Iran. Journal of Agricultural Economics and Development, 36(4), 413-429. DOI: 10.22067/jead.2023.77925.1148. [In Persian]