Analyzing Common Market Options in the Scope of OIC

Abstract

This paper initially employs the gravity model in order to analyze the trade data of selected 23 OIC countries and its 4 different subgroups. Then it applies stochastic frontier analysis to the model to gain efficiency scores and uncapped trade potential among countries in order to determine whether the group would have trade creation effect once they go for a Common Market structure. According to the statistical results, the 23 country group gives statistically significant results while deriving a %62 uncapped trade potential among group countries. Additionally, the 13-country subgroup also gives statistically significant results while deriving a %59 uncapped trade potential among them. While there are a number of studies which applies stochastic frontier analysis to the gravity model and gains efficiency scores, this study is the first to employ the method for OIC countries in order to determine the best possible country group for a Common Market without having trade diversion affect. The purpose of this study is to determine the Common Market options for Turkiye in the scope OIC in order to be a reference point for future Common Market initiatives.