The Impact of Economic Sanctions on Iran's Export: Using the Synthetic Control Method

Document Type : Research Article

Authors

1 PhD Student, Department of Economics, Payam-e-Noor University, Tehran, Iran.

2 Associate Professor, Department of Economics, Payam-e-Noor University, Tehran, Iran

3 Assistant Professor, Department of Economics, Payam-e-Noor University, Tehran, Iran

Abstract

This study employs the Synthetic Control Method (SCM) as an innovative method in evaluating the effects of a policy to assess the effect of the 2011 economic sanctions on Iran's exports during the period 2001-2018. For this purpose, in addition to Iran, ten other countries have been considered as a donor pool to simulate the trend of Iran's exports before and after the economic sanctions. New Zealand, Turkey, the UAE and China have played the most important roles in this simulation. The results show that while Iran could have achieved more than $ 150 billion in exports for each of the years since the embargo, the sanctions have caused Iran to lose an average of $ 74 billion export income annually. According to the estimated model, the largest export gap is related to 2015, when sanctions caused Iran's export to reach $ 60 billion. While according to the counterfactual export pattern and in the absence of sanctions in this year, the amount of exports could reached $159.7 billion, and the maximum export gap has been recorded $99.7 billion. The placebo test confirms the reliability of the estimates made by extending the SCM to all members of the donor pool. The results of this study show that Iran's export is affected by demand side factors. Developing friendly political relations with business partners, avoiding international disputes, and building sustainable trade relations through business links between firms are among the policy recommendations.

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References

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Journal of Applied Economics Studies in Iran
Volume 11, Issue 41
March 2022
Pages 97-127

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