The Impact of Bilateral Investment Treaties on Foreign Investment Inflows of Development Countries into Iran

Document Type : Research Article

Authors

1 PhD Candidate of Financial Economics, Department of Economics, Faculty of Economics and Social Sciences, Bu-Ali Sina University, Hamedan, Iran

2 Assistant Professor, Department of Economics, Faculty of Economics and Social Sciences, Bu-Ali Sina University, Hamedan, Iran (Corresponding Author)

3 Associate Professor, Department of Economics, Faculty of Economics and Social Sciences, Bu-Ali Sina University, Hamedan, Iran

10.22084/aes.2024.29017.3677

Abstract

This study aims at investigating the impact of bilateral investment treaties on foreign investment inflows into Iran from developed source countries. To achieve this purpose, the two common approach in foreign investment literature, that is, the gravity and knowledge-capital model has been used as the analytical framework of the study, as well as the pseudo-Poisson maximum likelihood method for the years 2002-2020. The results show that both gravity and knowledge-capital models provide an acceptable explanation of foreign investment inflows into Iran from developed countries. Except of Iran's real GDP, the main variables of the gravity model, that is, the geographical distance and real GDP of developed source countries are statistically significant and have the expected signs. All the main variables of the knowledge-capital model, including the difference between gross enrollment ratio in tertiary education of developed source countries and Iran (with a negative coefficient), sum of real GDP of developed source countries and Iran (with a positive coefficient) as well as Interaction of the difference between gross enrollment ratio in tertiary education of developed source countries and Iran and difference between real GDP of developed source countries and Iran (with a positive coefficient) are statistically significant and indicate that the foreign investment of developed countries in Iran is more horizontal than vertical. There is a positive and statistically significant relationship between bilateral investment treaties and foreign investment inflows into Iran from developed source countries in both gravity and knowledge-capital models. Finally, the sanctions imposed against Iran have reduced foreign investment inflows into the country.

Keywords

Main Subjects

References

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Journal of Applied Economics Studies in Iran
Volume 13, Issue 51
November 2024

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