Islamic Banking Agreements and Business Environment in Iran

The business environment is the conditions or environment except that the company manager or owner has the authority to change. This environment contains a wide variety of variables. It includes macroeconomic variables such as exchange rate, inflation, loan rates, international environment such as the country's positive or negative political conditions, the administrative environment, the quality of administrative services, the health of the administrative apparatus, the speed of work and the level of security. The main aim of the study is to investigate the effect of Islamic banking contracts on the business environment in Iran. In order to collect data and information about the variables in the model, Iranian Central Bank and World Bank website were used in this study. The Auto Regressive Distributed Lag (ARDL) approach was used to estimate the model between 1999-2017. According to the research findings, Karzol Hasaneh contracts, Exchange contracts and partnership contracts have positive and significant impact on business environment in both short and long term. In addition, the Human Development Index and Foreign Direct Investment (FDI) have a positive impact on business environment in both short-term and long-term. The negative impact of inflation has been determined in the short and long term business environment in the country. Based on the estimation of the Error Correction Model (ECM), the short-term imbalances of the dependent variable decrease by 54% and move towards long-term equilibrium.