The Macroeconomic Determinants and the Impact of Sanctions on FDI in Iran
DOI:
https://doi.org/10.2478/eb-2020-0002Keywords:
FDI inflows, GDP growth, Iran, macroeconomic factors, sanctions, political stabilityAbstract
We examine the impact of the macroeconomic determinants of foreign direct investment inflows. We also investigate the moderating role of sanctions in FDI inflows into Iran. The results reveal that macro determinants such as infrastructure, exchange rate, inflation rate, investment return, and governance have a long-run effect on FDI inflows in Iran. Our findings also show that GDP growth rate and trade openness have no significant effect on FDI. Our results indicate that sanctions do not have a significant moderating role in the relationship between macroeconomic factors and FDI. Surprisingly, international sanctions have a positive relationship with FDI inflows in Iran. Furthermore, sanctions have a positive impact on the inflation rate and exchange rate in Iran. Finally, our findings show that sanctions have had a significant impact on Iran’s economic growth in recent years due to increasing the severity level of sanctions.References
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Chan, M. W. L., Hou, K., Li, X., & Mountain, D. C. (2014). Foreign direct investment and its determinants: A regional panel causality analysis. Quarterly Review of Economics and Finance, 54(4), 579–589. https://doi.org/10.1016/j.qref.2013.07.004
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Cleeve, E. A., Debrah, Y. A. W., & Yiheyis, Z. (2015). Human Capital and FDI Inflow: An Assessment of the African Case, 74, 1–14. https://doi.org/10.1016/j.worlddev.2015.04.003
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Jimenez, A., de la Fuente, J. M., & Duran, J. J. (2011). Is there an East-West Structure in the Location of FDI in Europe? The role of institutions and political risk. research in economics and business: Central and Eastern Europe, 3, 5–23.
Kahai, S. K. (2011). Traditional and non–traditional determinants of foreign direct investment in developing countries. Journal of Applied Business Research, 20(1). https://doi.org/10.19030/jabr.v20i1.2194
Kar, S. (2013). Exploring the causal link between FDI and human capital development in India. Decision, 40, 3–13. https://doi.org/10.1007/s40622-013-0001-5
Kaufmann, D., Aart K. and Massimo M. (2009). Governance Matters VIII: Aggregate and Individual Governance Indicators for 1996–2008. World Bank Policy Research Working Paper No. 4978. Washington, D.C. https://doi.org/10.1596/1813-9450-4978
Kiyota, K., & Urata, S. (2008). The Role of Multinational Firms in International Trade: The Case of Japan. Japan and the World Economy, 20(3), 338–352. https://doi.org/10.1016/j.japwor.2007.03.003
Kuzmina, O., Volchkova, N. and Zueva, T. (2014) Foreign Direct Investment and Governance Quality in Russia. Journal of Comparative Economics, 42(4), 874–891. https://doi.org/10.1016/j.jce.2014.08.001
Lu, Y., Tao, Z., & Zhu, L. (2017). Identifying FDI spillovers. Journal of International Economics, 107, 75–90. https://doi.org/10.1016/j.jinteco.2017.01.006
Makino, S., & Delios, A. (1996). Local knowledge transfer and performance: Implications for alliance formation in Asia. Journal of International Business Studies, 27(5), 905–927. https://doi.org/10.1057/palgrave.jibs.8490156
Mengistu, A. A., & Adhikary, B. K. (2011). Does good governance matter for FDI inflows? Evidence from Asian economies. Asia Pacific Business Review, 17(3), 281–299. https://doi.org/10.1080/13602381003755765
Mirzaie I. (2014). Government policy, inflation, and exchange rates in the era of sanctions: the case of contemporary Iran, Harvard economic review. Available from: http://harvardecon.org/?p=3106.
Moreira, S. B. (2009). The determinants of foreign direct investment: What is the evidence for Africa? Poiésis, Universidade do Sul de Santa Catarina, Santa Catarina, 2(1), 83–104. https://doi.org/10.19177/prppge.v2e3200983-104
Morisset, P. (2000). Foreign direct investment to Africa: Policies also matter. Trans-national corporation, 9(2), 107–125.
Mowatt, R., & Zulu, T. (1999). Intra-Regional Private Capital Flows in Eastern and Southern Africa: A study of South African investment in the Region. ACREFSA/FDI workshop on Intra-Regional Private Capital Flows in Eastern and Southern Africa, Harare.
Musibah, S., Shahzad, A., & Fadzil, F. (2015). Impact of Foreign Investment in the Yemen’s Economic Growth: The Country Political Stability as the Main Issue. Asian Social Science, 11(4), 102–116. https://doi.org/10.5539/ass.v11n4p102
Ndeffo, L.N. (2010). Foreign direct investments and human capital development in Sub-Saharan Africa. Economics and Applied Informatics, XVI (2), pp. 37–50.
Nonnemberg, M. B. and Cardoso de Mendona, M. J. (2004). the determinants of foreign direct investment in developing countries. Available from: http://www.anpec.org.br/encontro2004/artigos/A04A061.pdf
Nurudeen, A., Auta, E. M., & Wafure, O. G. (2011). Determinants of Foreign Direct Investment in Nigeria: An Empirical Analysis. Global Journal of Human Social Science, 10(1), 26–34.
OECD (2004). The impact of trade-related intellectual property rights on trade and foreign direct investment in developing countries, working party of the Trade Committee, No. 42.
OECD (2016). Country Risk Report.
Parajuli, S., & Kennedy, P. L. (2010). The Exchange Rate and Inward Foreign Direct Investment in Mexico, Paper Presented at the Southern Agricultural Association, Florida, USA.
Sahoo, P. (2006). Foreign direct investment in South Asia: Policy, trends, impact and determinants. Discussion Paper, No. 56, Asian Development Bank Institute, Tokyo.
Salim, A., Razavi, M. R., Afshari-Mofrad, M., Saleh, A. S., Anh Nguyen, T. L., Vinen, D., Zueva, T. (2017). The determinants of FDI and the impact of the economic crisis on the implementation of RTAs: A static and dynamic gravity model. International Business Review, 24(1), 0–1.
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31.03.2020
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Copyright (c) 2020 Mehdi Rasouli Ghahroudi et al., published by Sciendo
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Ghahroudi, M. R., & Chong, L. C. (2020). The Macroeconomic Determinants and the Impact of Sanctions on FDI in Iran. Economics and Business, 34, 15-34. https://doi.org/10.2478/eb-2020-0002
