ANALYSIS OF FOREIGN TRADE BETWEEN TURKEY AND IRAQ WITH GRAVITY MODEL

Liberalization is one of the phenomenon which show its effect in the world in the last fifty years. In this regards, export and import volume of the world is increasing gradually. Since the foreign trade has a significant place for the world economy, factors affecting foreign trade has gained importance. In this context, Augmented Gravity Model, which associate distance between countries with foreign trade, measures effect of distances between countries on foreign trade and has begun to be popular in recent times, is the main subject of the study. Objective of the study is to analyze Turkey’s and Iraq’s export, import and total foreign trade volume by using augmented gravity model for the period of 1990-2016. The explanatory variables are Turkey’s, Iraq’s and their partner countries’ economic size, economic size similarity, relative factor endowment, populations, distance between capital, and common border dummies. The dependent variables are Turkey’s and Iraq’s export, import and foreign trade. Findings of the study were that Turkey and Iraq tends to make trading more with countries with high income. Findings also support that Turkey’s export and Iraq’s import has inter-industry trade pattern. The coefficient of distance variable for Turkey’s foreign trade was significant and had negative sign as expected. Also the coefficient of common border dummy for Iraq’s foreign trade was significant and had positive sign