The Effect of Macroeconomic Instability on the Number of Active Firms in Iran

In decades, improving The business environment is considered a solution for the economic problems of societies on a macro level. The business environment includes factors outside the control of economic actors that can affect their business performance. In recent decades, this concept has been considered by countries and international institutions, so that a part of a country's macro policies and objectives is assigned to improving the business environment. Hence, this study analyzes the effect of macroeconomic instability on a number of active firms in the Iranian business environment. Our results show that the quality of the economic, physical and human environment affected the the number of active firms in the framework of cointegration and VAR models. In other words, increasing macroeconomic instability as an index of -negative- the quality of economic environment reduces the number of active firms in the long run. Human development and physical capital have positive and significant effects on increasing the number of active firms. In this context, it is necessary to adopt proper plans and programs for removal of barriers, especially economic instability, and to implement these programs by the government.