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In this paper we try to determine the set of factors which affect on foreign direct investment flow and to show the conditions in attracting FDI in Iran.
While the major factors are determined, we try to estimate and measure the significant of the important factors that effect on FDI inflow to Iran by using the Bajio-Simon model(1996) and ARDL method during the period of 1353-1380 .
The three set of result show that during the period of study both in short run and long run, inflation rate that in general implies the ineffectiveness of economic policy has negative impact in absorbing FDI, Further more, increasing in GDP ,capital stock and degree of openness in economy that means the reduction of tariff barriers in the country ,have the positive effects on FDI flow to Iran. Also increase in interest rate and exchange rate will have a negative effect on FDI flow to the country. The result of survey also shows that the wage level doesn’t have any effect on FDI inflow. Moreover,
The result of dynamic model confirms the long run relationship between explanatory variables and FDI. The ECM model also implies that any shocks imposed to each of independent variables of the model may continue to 2.5-3 years are need for FDI to return to its long –term trend .
JEL classification: F21, F23