The Impact of Economic Security Indices on Private Investment in Iran (1981-2000)

SharifAzadeh, Mohammad Reza; Hosseinzadeh Bahraini, Mohammad Hossein

The Impact of Economic Security Indices on Private Investment in Iran (1981-2000)

Document Type : Original Article

Authors

Mohammad Reza SharifAzadeh ¹

Mohammad Hossein Hosseinzadeh Bahraini ²

¹ Professor of Economics, Allameh Tabatabaei University

² Assistant Professor Ferdowsi University of Mashhad

Abstract

The private investment in any country is influenced by economic variables such as inflation rate, exchange +rate, public investment, foreign direct investment as well as by institutional variables related to the security of investment circumstances. The paper focuses on the effect of security variables on Iran’s private investment. The findings show that the institutional variables such as political stability, the rule of law and order, the risk of internal and external conflicts, and the gap between public expectations and the government economic performance has a substantial and significant effect on the ratio of private investment to the GDP.
The effect of the two variables: “the accountability of the administration against public and democratic institutions” and “corruption of the administration” on the ratio of private investment to the GDP is negative but not highly significant. The impact of variables: “the risk of weak commitment to contracts” and “confiscation of private investments by government” is positive but insignificant and “the quality of administrative system” and “the risk of tribal conflicts” do not show a significant relationship with private investment to GDP ratio. The application of cumulative indices, - derived from aggregation of all or some of the aforesaid institutional indices, - demonstrates that the nature and performance of government highly affects on Iran’s private investment.

Keywords

private investment

economic security

government stability

the rule of law and order

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