The Impact of Economic Sanctions on Trade in Iran An Application of Gravity Model

Abstract

This paper examines the impact of economic sanctions on bilateral trade between Iran and 30 trading partners over the period of 1970-2006. To accomplish this Purpose, a generalized gravity model is estimated using panel data estimation method in two situations: with and without sanction. The results show that sanctions have a small negative impact on bilateral trade. By imposing sanction on Iran by its trade partners, the bilateral trade reduces 0.089 percentage point. So, the negative effects of economic sanctions on Iran's trade with trading partners is negligible.

Keywords

• economic sanctions
• bilateral trade
• generalized gravity model
• panel data estimation