International trade and foreign investment

The trade volume of a country is determined by many factors, and not simply by government policies. For example, some countries trade more just because they are closer to well-populated countries or endowed with abundant natural resources, and some trade less because they are isolated or land-locked or do not have any significant amount of natural resources. Muslim countries have all these geographic characteristics (see Chaps. 4 and 5), and such geographic factors are not a consequence of income or government policy. As the literature on the gravity model of trade demonstrates, geography is a powerful determinant of bilateral trade (see, e.g., Frankel 1997; Linneman 1966).