Financial Diversification Analysis of Trade Integration: the Case of Iran and Its Trading Partners (ECO, D8 and Eurasian Countries)

Academics and planners in the financial sector have researched the impact of financial development on commerce and trade integration in recent years due to its importance and interaction with other sectors, notably international trade. thus, using 12 selected countries’ data that are members of the economic cooperation organization (eco), eurasia, and d8 during the period 1996-2020 and the augmented gravity model, this study examined the effect of financial tools like financial liberalization (fl) and open market operation (omo) on trade integration between iran and the selected countries. the index of financial liberalization positively and statistically significantly affects trade integration in the countries studied. additionally, trade integration elasticity is +0.01 higher than omo index. economic magnitude is another independent determinant that boosts trade integration. in the analyzed countries, income convergence, population, real exchange rate, and geographical distance negatively impact trade integration. this study may be useful to policymakers and planners in eco, eurasia, and d8 nations, particularly iran, in developing trade and financial sector development plans because trade integration can improve bilateral trade flows, economic growth, and social welfare.prior studies have measured commercial integration's impact. financial development with open market and financial liberalization indicators affects trade integration in this study.