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A GENERAL EQUILIBRIUM MODEL OF CUSTOMS UNION AMONG MUSLIM COUNTRIES

Ahmad, Salman (1995) A GENERAL EQUILIBRIUM MODEL OF CUSTOMS UNION AMONG MUSLIM COUNTRIES. PhD thesis, International Islamic University, Islamabad.

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Abstract

Economic integration as an instrument of growth and expansion is gaining popularity among the nations. In this context this dissertation estimates potential benefits of a customs union of Muslim countries. Focusing on ex-ante benefits, the dissertation employs computable general equilibrium methodology for estimating production and trade flows of the member countries of the proposed customs union. The proposed customs union consists of nine countries: Pakistan, Iran, Turkey, Bangladesh, Indonesia, Malaysia, Tunisia, Sudan and Morocco. These countries have been chosen because they represent the contemporary Muslim world geographically. The model has chosen nine commodities: natural rubber, wood, jute, rice, petroleum, cotton, cotton yarn, and cotton cloth and phosphate ore for its analysis. These have been chosen because they are produced and traded intra-regionally. The theoretical reasoning behind the model rests on the basis that economic agents are rational. The producers and traders respond to changes in prices of these commodities resulting from abolition of consequent upon formation of the customs union. While calculating economic effects, competitive market conditions and full employment are assumed. Another significant assumption is that each country exports only one commodity. This has helped in solving the model as it results in square matrix. The dissertation finds that significant increases in production and intra-regional trade takes place in respect of the nine commodities. The estimation results show that the size and magnitude of the production and intra-regional trade increases considerably for the union as a whole. The model using 1990 data shows that production of rice increase by $2771 billion, petroleum by $ 3319 billion, cotton by $719 billion, cotton yarn by $3 billion and natural rubber by $15 billion. The demand for all the goods increased due to fall in prices and trade increased in the cases of rice by $ 1846 billion, cotton by $ 109 billion, jute by $ 822 billion, cotton yarn by $415 billion, phosphate by $28 billion and wood by $3722 billion. The significant amount of trade creation entails far-reaching positive implications for income and employment of these countries. These findings indicate the feasibility of establishing a Customs union of Muslim countries. Given the existing political understanding among the members of OIC, the prospects of formation of such a union looks bright. In this context, the thesis concludes that the establishment of such a union is the need of the hour for the Muslim countries. It is not only morally desirable but also economically feasible. The establishment of such a union will move a step forward in making the goals of OIC into reality.

Item Type:Thesis (PhD)
Uncontrolled Keywords:Muslim countries, Economic integration, Pakistan, Iran, Turkey, Bangladesh, Indonesia, Malaysia, Tunisia, Sudan, Morocco, Natural rubber, Wood, Jute, Rice, Petroleum, Cotton, Cotton cloth, Phosphate, Intra regional trade, OIC, Production, Islamic views, Consumption, Partial equilibrium, General equilibrium, Non-tariff Barriers,
Subjects:Social Sciences(g) > Economics (g5)
ID Code:211
Deposited By:Mr Ghulam Murtaza
Deposited On:17 Jun 2006
Last Modified:04 Oct 2007 21:00

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