Determinants of Foreign Direct Investment (A Case Study for Iran)

Foreign Direct investment is at the cutting edge of economic growth and development, filling the saving - investment gap and providing countries with both technology and modern techniques of management. The article, here, deals with striking factors which affected FDI in Iran through 1959 – 2003. The results of the studies approved that FDI depends on: capital recovery rate, political rights, infrastructures, natural resource availability, corruption and bureaucratic red tape, human capital, inflation, exchange and tax rate, market expansion, economic growth, productivity, domestic investment and openness of the economy. The evaluation of the presented model shows that: 1) natural resource availability, human capital and infrastructures have a direct and positive impact on FDI in Iran, 2) political rights and dummy variables of Islamic republic of Iran have affected Iran's FDI significantly as well as conversely, and 3) openness of the economy has positive and insignificant influences and the ratio of government expenditure to GDP has insignificantly and indirectly affected FDI.