Investigating the effect of financial risk on industrial exports and intra-group industrial exports of member countries of the Organization of Islamic Cooperation (OIC)
Subject Areas :mehdi jahanbakhsh porjabari 1 , فرزاد کریمی 2 * , mostafa rajabi 3
1 - Department of Economics, Faculty of Management and Economics, Dahaghan Islamic Azad University, Isfahan, Iran
2 - Associate Professor, Department of Management, Mobarakeh Branch, Islamic Azad University, Mobarakeh, Iran (Responsible Author)
3 - Department of Economics, Faculty of Economics, Khomeini Shahr Islamic Azad University, Isfahan, Iran
Keywords: Industrial exports, OIC countries, financial risk, pseudo-Poisson maximum likelihood method,
Abstract :
Objective: Exports of industrial goods are an important part of development strategies for most developing countries, which are easily affected by financial risk. Given the importance of industrial goods trade in the economies of OIC countries and the fact that all the countries with the highest economic growth in the world have a high and growing share in industrial exports, OIC countries must also plan for the development of industrial exports and remove obstacles to them and develop a long-term strategy to achieve this goal.
Research methodology: Accordingly, the main objective of this paper is to assess the impact of financial risk on the bilateral industrial export flows of OIC member countries against more than one hundred trading partners and also from the perspective of intra-group trade in these countries, along with other traditional variables of the gravity model. This study examines the total and intra-group export patterns of these countries from the perspective of the gravity model and using the pseudo-Poisson maximum likelihood (PPML) method during the period 2002 to 2021.
Findings: The results show that financial risk has affected the pattern of intra-group industrial exports of these countries. The findings indicate that overall, reducing financial risk (increasing the numerical value of the index) in export destination countries has had a positive and significant effect on the flow of intra-group industrial exports of these countries and has increased it. However, this result is not true for the exporting countries of origin. The results also showed that the financial risk of OIC member countries is the main determinant of the flow of bilateral industrial exports of these countries to export destinations. The variables of common border and GDP of the countries of origin and destination with a positive sign and weighted distance with a negative sign and significant at the one percent error level affect the flow of total and intra-group industrial goods exports between Islamic countries. Meanwhile, the real exchange rate variable is only statistically significant at the ten percent error level.
Originality / Scientific added value: This study suggests that the member countries of the organization should pay more attention to the role of financial risk in the formation of their industrial export patterns. Therefore, any change in financial risk in member countries is of obvious importance in changing the flow of bilateral industrial exports of this group of countries to export destinations, and this factor can act as a significant inhibitor in the boom or bust of industrial exports of member countries.
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