Factors affecting the Virtual Water Trade of Agricultural Crops of Iran (Application of Panel Vector Autoregression Model)

The physical trade of agricultural crops from a country to another one involves the virtual transfer of water resources or the virtual water trade. Because agricultural commodities contain a lot of water embedded. The aim of this paper was to quantify the volumes of the virtual water trade of crops of Iran in 2001–2018 and to assess the effective factors on the virtual water trade of crops of Iran. Initially, water footprint and virtual water trade were calculated. Macroeconomic variables affecting virtual water trade were identified and determined by the virtual water import and export functions. Then, the unit root test of the variables was performed by the Im Pesaran Shin test and the PVAR model was used for the factors affecting the virtual water trade. The results showed that the relative export price has the greatest impact on the virtual water export of crops of Iran. The shock on the income of major trading partners has led to a decline in virtual water exports. Regarding the import function, it was found that relative import prices and domestic income has a major impact on the import of virtual water of Iranian agricultural crops. The calculations of the virtual water showed that Iran has exported 90.896 × 109 m3 virtual water from 2001 to 2018. Out of which, approximately 27.06% was green water, 66.10% blue water, and 6.84% gray water. The amount of virtual water import estimated was 280.260 × 109 m3, 75% of which was green water.