The Effect of Foreign Direct Investment on Economic Growth of Iran Through the Channel of Financial Markets

Abstract

Nowadays, the effect of foreign direct investment on economic growth, theatrically & empirically, has been proved. Developed countries have experiences, using FDI for reaching stability on economic growth and of course in this channel should not ignore the role of financial markets in these countries. In this paper, first the effect of FDI on economic growth has been investigated and then for the purpose of determining the stability of this effect, controlling variables have been used. The result shows that when controlling variables used, FDI have no effect on economic growth. According to this, several variables have been introduced to determining the role of financial markets. Through combining these variables and entering them in the growth model it is obvious that the effect of FDI on economic growth is significant. Therefore, it is concluding that, in Iran with better –developed financial markets, the effect of FDI on economic growth will be improved.