The Impact of Joining the World Trade Organization (WTO) on Trade Volume of Afghanistan

Abstract

This study examines the impact of the WTO membership of Afghanistan on its trade balance. The gravity model of international trade is employed to analyze data from 2010 to 2019. Trade Volume is used as a dependent variable and GDP, Population, Geographical Distance, Border, Common Language, Religion and WTO membership as independent variables. In addition to Ordinary Least Squares (OLS), Random Effects (REs), and Fixed Effects (FEs) estimations methods, the Poisson Pseudo Maximum Likelihood is employed as a key method to estimate the results and the test the hypothesis of the research. The results of the research indicate all the explanatory variables, except population have statistically significant relation with trade volume of Afghanistan, GDP, WTO membership and common language variables are related positively with trade and Common border, Common religion, and Geographical distance variables are affecting negatively the trade in Afghanistan. Along with the previous research in the region, the results show, as expected, that countries generally gain from a membership in the WTO.