Abstract :
Although there has been steady increase in intra-OIC trade, defined as intra-OIC imports as a share of total imports of OIC countries, in last few years, recent literature on intra-OIC trade shows that OIC membership has not much to contribute trade between OIC member countries. Then, what is the determinant of recent increase in intra-OIC imports from 14.4 to 17.6 between 2002 and 2006? Given the Makkah Declaration and the Ten-Year Programme of Action to increase intra OIC trade to 20% of global trade by the year 2015, this paper scrutinizes the determinant of intra-OIC trade by gravity modeling for the time period of 1995-2007. The data used herein is in real terms. Unlike recent literature, four important international trade determinants, tariff, proxy for trade facilitation liberalization and depreciation of real exchange rate, together with depreciation of US dollar against Euro are included to the model. As for reference to border puzzle problem in recent intra-OIC trade literature, inclusion of these variables is argued to mitigate the omitted variable bias in the model.
