The Impact of Currency Union Formation on Trade among Organization of Islamic Corporation (OIC) Members Using Optimum Currency Area (OCA) Theory and Augment Gravity Model

Document Type : Research Paper

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Abstract

In recent years, the formation of Islamic currency union has been considered in most OIC members countries. In this paper, the impact of formation of currency union on trade in OIC countries using OCA theory and augment gravity model from 1990-2011 was investigated. The results show that the factors such as common border, the existence of trade unions and common language have positive and significant effects on the flow of trade between Islamic countries, while other factors such as exchange rate volatility, landlocked and countries distance have negative and significant effects on the flow of trade between Islamic countries. As well as the formation of currency union has positive and significant effects on the flow of tradein OIC countries.

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Quarterly Journal of Applied Theories of Economics
Volume 1, Issue 1 - Serial Number 1
September 2014
Pages 1-28

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