Examining the Instability and Asymmetry Model of Attracting Foreign Direct Investment (FDI) in Iran

Subject Areas : Applied Economics

کامبیز  هژبر کیانی ¹ (ندارد)
محمدرضا  ناهیدی ² (ندارد)

Received: 2011-04-07 Accepted : 2011-06-12 Published : 2010-09-23

Keywords: foreign direct investment, exchange rate, Labor Productivity, Degree of Openness of the Econ, Investment Security, Generalized Auto- Regressive C,

Abstract :

In the past few decades several countries in the world have attracted foreign direct capital as one of the instruments needed for financing the increasing level of internal investment. In this connection, the economic conditions of host countries for increasing the level of FDI have been considered as an important factor in achieving their objective. In this study, the impact of some macro-economic variables on FDI is examined in detail in Iran. The period selected is 1352-1388 years and the econometric technique used in this article is the Generalized Auto-Regressive Conditional Heteroskedasticity(GARCH) for evaluating the conditions of instability and Power Generalized Auto-Regressive Conditional Heteroskedasticity (PGARCH) for the conditions of asymmetry. The estimated results of  the model show that under conditions of instability, increasing the exchange rate has a negative impact on FDI, whereas raising labor productivity, protecting investment security and keeping the degree of openness of the economy has a positive effect on attracting FDI. The estimated outcomes obtained under the unstable conditions, due to the type of impact that the explanatory variables may put on the dependent ones, are similar with those under the stable short-run and long-run model with different effective coefficients[1] and that on the other hand they show a positive effect of the shock caused under the unstable conditions on net decrease in FDI. In sum, the results show the asymmetric effects of the shocks on net FDI.