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Economy and Food Security 2026, 1(1): 1-11 |
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Rezaeifar M, Hamed Najafi Alamdarlo H, Jami A. (2026). Factors Affecting the Trade of Agricultural Products of the Member Countries of the Shanghai Cooperation Organization using the Gravity Model: a Panel Cointegration Approach with Cross-Sectional Dependence. Economy and Food Security. 1(1), 1-11. doi:10.61882/efs.2025.67
URL: http://efs.sanru.ac.ir/article-1-67-en.html
URL: http://efs.sanru.ac.ir/article-1-67-en.html
1- Faculty of Agriculture, Tarbiat Modares University, Tehran, Iran
2- Department of Economics, Faculty of Agriculture, Tarbiat Modares University, Tehran, Iran
2- Department of Economics, Faculty of Agriculture, Tarbiat Modares University, Tehran, Iran
Abstract: (1107 Views)
Extended Abstract
Background: One of the most important and successful organizations in the Central Asian region is the Shanghai Cooperation Organization (SCO), whose membership has led to economic integration among its member states. The SCO provides a platform for member countries to cooperate in trade, both bilaterally and multilaterally, thereby contributing to regional development. If the organization continues on its path of success, its impact will be felt in the lives of about 45 percent of the world’s population, a remarkable achievement in the progress of the planet. The agricultural sector, as one of the strategic areas, not only ensures food security but also plays a key role in the economic growth, job creation, and the expansion of non-oil exports. In this regard, agriculture is one of the sectors influenced by Iran’s membership in the SCO. Given its significant share in GDP and employment, Iran’s agricultural sector holds special importance, and any changes in its trade relations with SCO member countries can have direct effects on the country’s sustainable economic development. Therefore, this study examined factors affecting the trade in agricultural products between Iran and SCO member states and addressed the question of whether Iran’s membership in the SCO improves bilateral trade in agricultural products between Iran and the organization’s members.
Methods: To achieve the research objective, statistical data related to the member countries of the SCO, including China, Russia, India, Pakistan, Uzbekistan, Tajikistan, Kazakhstan, Kyrgyzstan, and Iran, were collected from the World Bank and the Customs Administration of the Islamic Republic of Iran for the period 2001 to 2022. In this regard, the Pesaran cross-sectional dependence test (2004) was first conducted to examine the existence of correlations among countries. Subsequently, the Pesaran unit root test and the Westerlund panel cointegration test (2007) were employed to investigate the long-term relationships among the variables. Finally, the gravity model was applied as the theoretical and empirical framework to estimate coefficients and analyze trade relations. This model was chosen due to its ability to explain trade flows between countries based on economic and geographical factors, making it an appropriate choice for the subject of the study.
Results: To examine factors influencing the volume of bilateral trade in agricultural products between Iran and the members of the SCO, the extended gravity model was estimated using data from member countries over the period 2001 to 2022. In this study, the Pesaran cross-sectional dependence test (2004) was first applied to determine the presence or absence of cross-sectional dependence. After confirming cross-sectional dependence, the Pesaran unit root test and the Westerlund panel cointegration test (2007) were conducted to estimate the long-term equilibrium relationship among the model variables. The existence of a long-term equilibrium relationship among the variables was accepted based on the Westerlund cointegration test. Following the confirmation of cointegration, the gravity model was estimated using panel data for the period 2001–2022 without concern for spurious regression. Subsequently, analyzing the Hausman test results revealed their statistical significance, and the fixed effects model was selected as the appropriate method.
The findings revealed that GDP, geographical distance, real exchange rate, Linder variable, and the dummy variable for membership in the SCO were the key factors affecting bilateral trade relations in agricultural products between Iran and SCO member states. Specifically, a 1% increase in the GDP of SCO member countries raised the bilateral trade volume of agricultural products between Iran and these members by 0.04 percent. Likewise, a 1% increase in the real exchange rate increased bilateral trade in agricultural products by 0.17 percent. In contrast, geographical distance negatively affected trade between Iran and the SCO members. Moreover, the coefficient of the dummy variable for SCO membership indicated that Iran’s accession to the organization increased the trade between Iran and its members by 0.19 percent.
Conclusion: Based on the findings of the study, the following recommendations are proposed to expand agricultural trade between Iran and the members of the SCO. An increase in gross domestic product, which reflects the economic capacity and strength of countries, enhances their ability to produce and absorb goods, thereby strengthening supply and demand in bilateral trade. Accordingly, the growth of GDP in Iran and its trading partners will lead to the development of agricultural exchanges between the two sides. Since the exchange rate has a positive effect on agricultural trade, trade policies should be designed in a way that does not hinder the growth of this sector. Considering the negative relationship between geographical distance and trade volume, it is essential to develop international transportation infrastructure. Moreover, countries geographically closer to Iran possess greater potential for trade cooperation, making the conclusion of regional agreements with them particularly important. Finally, given Iran’s relatively inactive participation in regional agreements, its recent membership in the SCO can provide valuable opportunities for expanding agricultural trade and strengthening economic cooperation with member states.
Background: One of the most important and successful organizations in the Central Asian region is the Shanghai Cooperation Organization (SCO), whose membership has led to economic integration among its member states. The SCO provides a platform for member countries to cooperate in trade, both bilaterally and multilaterally, thereby contributing to regional development. If the organization continues on its path of success, its impact will be felt in the lives of about 45 percent of the world’s population, a remarkable achievement in the progress of the planet. The agricultural sector, as one of the strategic areas, not only ensures food security but also plays a key role in the economic growth, job creation, and the expansion of non-oil exports. In this regard, agriculture is one of the sectors influenced by Iran’s membership in the SCO. Given its significant share in GDP and employment, Iran’s agricultural sector holds special importance, and any changes in its trade relations with SCO member countries can have direct effects on the country’s sustainable economic development. Therefore, this study examined factors affecting the trade in agricultural products between Iran and SCO member states and addressed the question of whether Iran’s membership in the SCO improves bilateral trade in agricultural products between Iran and the organization’s members.
Methods: To achieve the research objective, statistical data related to the member countries of the SCO, including China, Russia, India, Pakistan, Uzbekistan, Tajikistan, Kazakhstan, Kyrgyzstan, and Iran, were collected from the World Bank and the Customs Administration of the Islamic Republic of Iran for the period 2001 to 2022. In this regard, the Pesaran cross-sectional dependence test (2004) was first conducted to examine the existence of correlations among countries. Subsequently, the Pesaran unit root test and the Westerlund panel cointegration test (2007) were employed to investigate the long-term relationships among the variables. Finally, the gravity model was applied as the theoretical and empirical framework to estimate coefficients and analyze trade relations. This model was chosen due to its ability to explain trade flows between countries based on economic and geographical factors, making it an appropriate choice for the subject of the study.
Results: To examine factors influencing the volume of bilateral trade in agricultural products between Iran and the members of the SCO, the extended gravity model was estimated using data from member countries over the period 2001 to 2022. In this study, the Pesaran cross-sectional dependence test (2004) was first applied to determine the presence or absence of cross-sectional dependence. After confirming cross-sectional dependence, the Pesaran unit root test and the Westerlund panel cointegration test (2007) were conducted to estimate the long-term equilibrium relationship among the model variables. The existence of a long-term equilibrium relationship among the variables was accepted based on the Westerlund cointegration test. Following the confirmation of cointegration, the gravity model was estimated using panel data for the period 2001–2022 without concern for spurious regression. Subsequently, analyzing the Hausman test results revealed their statistical significance, and the fixed effects model was selected as the appropriate method.
The findings revealed that GDP, geographical distance, real exchange rate, Linder variable, and the dummy variable for membership in the SCO were the key factors affecting bilateral trade relations in agricultural products between Iran and SCO member states. Specifically, a 1% increase in the GDP of SCO member countries raised the bilateral trade volume of agricultural products between Iran and these members by 0.04 percent. Likewise, a 1% increase in the real exchange rate increased bilateral trade in agricultural products by 0.17 percent. In contrast, geographical distance negatively affected trade between Iran and the SCO members. Moreover, the coefficient of the dummy variable for SCO membership indicated that Iran’s accession to the organization increased the trade between Iran and its members by 0.19 percent.
Conclusion: Based on the findings of the study, the following recommendations are proposed to expand agricultural trade between Iran and the members of the SCO. An increase in gross domestic product, which reflects the economic capacity and strength of countries, enhances their ability to produce and absorb goods, thereby strengthening supply and demand in bilateral trade. Accordingly, the growth of GDP in Iran and its trading partners will lead to the development of agricultural exchanges between the two sides. Since the exchange rate has a positive effect on agricultural trade, trade policies should be designed in a way that does not hinder the growth of this sector. Considering the negative relationship between geographical distance and trade volume, it is essential to develop international transportation infrastructure. Moreover, countries geographically closer to Iran possess greater potential for trade cooperation, making the conclusion of regional agreements with them particularly important. Finally, given Iran’s relatively inactive participation in regional agreements, its recent membership in the SCO can provide valuable opportunities for expanding agricultural trade and strengthening economic cooperation with member states.
Type of Study: Research |
Received: 2025/07/5 | Accepted: 2025/12/1
Received: 2025/07/5 | Accepted: 2025/12/1
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