The Role of Foreign Direct Investment in the Effect of Logistic's Performance on Iran's Economic Growth with an Emphasis on Institutional Quality

Document Type : Research Paper

Authors

1 Ph.D. student in Economics, Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

2 Assistant Professor of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

3 Associate Professor of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

10.30465/jnet.2025.49718.2157

Abstract

Foreign direct investment (FDI) plays an important role in economic growth. Also, the countries' institutional environment with its influence on the legislation's quality and logistic infrastructures with trade facilitation for business owners are considered as an effective factor on the foreign investors' decisions. In this article, for investigating the role of FDI in transferring the effects of logistics performance and institutional quality on Iran's economic growth in 2007-2022, two models for FDI and per-capita growth were estimated using the FMOLS method. The results showed that logistics performance and the legal system health as institutional quality index, had a positive effect and the multiplication of them had a negative effect on FDI. The calculation of the logistics performance final effect, achieved a threshold of 0.792 for the legal system health, so that before this threshold, the increase of this index leads to increase this positive effect of logistics performance on FDI, but after passing the threshold, the effect reduces this relationship. In addition, FDI had a positive effect on economic growth. Based on Sobel, Aroyan and Goodman tests, the role of FDI in transferring the effects of logistics performance, legal system health and their cross effect on economic growth was confirmed.

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History

  • Receive Date: 13 August 2024
  • Revise Date: 18 September 2024
  • Accept Date: 26 September 2024

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