Relationship between Foreign Direct Investment and Economic Growth across Countries: Emphasis on this Relationship in Iran by Markov Switching Approach

Ghalambaz, Farhad; Souri, Ali; Abdoli, Ghahraman; Ebrahimi, Mohsen

doi:10.30473/egdr.2018.4623

Document Type : ORIGINAL ARTICLE

Authors

¹ Ph.D. Student in Financial Economics, International Campus-Kish Island, University of Tehran, Tehran, Iran

² Professor at Faculty of Economics, University of Tehran, Tehran, Iran

³ Associate Professor at Faculty of Economics, University of Kharazmi, Tehran, Iran

https://doi.org/10.30473/egdr.2018.4623

Abstract

Investigation of factors that affect economic growth has been always attractive. Foreign direct investment is one of the variables that have potential effects on growth. This study carried out to investigate the impact of foreign direct investment on economic growth. We consider the role of natural resources using panel threshold regression model for 1996 to 2015 period and also emphasis on relationship between foreign direct investment and economic growth in Iran by Markov Switching Approach for 1976-2015. Panel threshold regression model formed based on Hansen’s (1999) suggested model then that estimated by Wang’s (2015) proposed method for fixed effect models. Results of threshold regression model showed that natural resources, domestic capital formation, population growth rate and governance indicator has statistically significant effect on economic growth. Threshold level for natural resources is 28.58 percentages. Foreign direct investment variable has different effect on economic growth in regimes. In first regime foreign direct investment increase economic growth but in second regime, that natural resources is more than threshold level, it decrease growth rate. Results of tow regimes Auto-Regressive Markov Switching model for Iran showed that foreign direct investment in recession regime is insignificant but this variable in boom regime has statistically significant effect and this relationship is negative.

Keywords

20.1001.1.22285954.1397.8.32.1.0

Main Subjects

Economic Growth

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Economic Growth and Development Research

Relationship between Foreign Direct Investment and Economic Growth across Countries: Emphasis on this Relationship in Iran by Markov Switching Approach

References

References

Volume 8, Issue 32
October 2018
Pages 32-15

Relationship between Foreign Direct Investment and Economic Growth across Countries: Emphasis on this Relationship in Iran by Markov Switching Approach

References

References

Volume 8, Issue 32October 2018Pages 32-15

Volume 8, Issue 32
October 2018
Pages 32-15