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Analyzing Impacts of Foreign Direct Investment on Private Sector in Economic Growth of Iran

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  • Seyed Reza Miraskari
  • Mahyar Shabaninejad Masouleh
  • Seyed Abolfazl Alavi

Abstract

The objective of this paper is to investigate and analyze the relationship between foreign direct investment (FDI) and economic growth, and the influence of FDI on private sector in stimulating economic and industrial growth in Iran. The general assertion in financial literature supports the construct that FDI is the prime modality for stimulating economic and industrial development in developing nations. As an empirical work, we have studied the direct and indirect effects of FDI on economic growth of Iran during the period 1970-2012. Results of regression model estimation have showed that coefficient of FDI (foreign direct investment, net inflows (% of GDP)) wasn’t significant, but interaction between FDI and private sector has a significant impact on economic growth of Iran at 5% significant level in the period 1970-2012. This finding show that impacts of FDI on economic growth depends on the extent of the development of the private sector. Private sector acts as a channel for the linkage effect to be realized and create positive spillovers. Also, our findings indicate that trade openness is positively and significantly correlated with economic growth of Iran in the selected period.

Suggested Citation

  • Seyed Reza Miraskari & Mahyar Shabaninejad Masouleh & Seyed Abolfazl Alavi, 2014. "Analyzing Impacts of Foreign Direct Investment on Private Sector in Economic Growth of Iran," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(11), pages 223-237, November.
    • Handle: RePEc:hur:ijarbs:v:4:y:2014:i:11:p:223-237
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    More about this item

    Keywords

    Foreign Direct Investment (FDI); Economic Growth; Private Sector; Trade Openness; Spillovers;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F10 - International Economics - - Trade - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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