The Role of Political Conflicts in the Severe Decline of the Investment in Iran During the 2010

Since the beginning of the 2010s, the investment in Iran has experienced a continuous and severe fall and the level of the total real investment at the end of 2018 has approximately reached its 2002 level. In this paper, we show that the fluctuation of the investment (in machinery) up to the beginning of 2010s can be explained by the use of a regression model which includes macroeconomic variables as well as measures of instability in macro environment. However, this model is not able to predict the investment drop during the 2010s and it seems that other factors play a crucial role in the severe fall of the investment in this decade. We will introduce “Political Conflicts” and “Economic Policy Uncertainty” as two indices which are constructed by applying the text analysis method to the press and digital media from 2002 to 2019. The trend of these two indices show a high degree of uncertainty during the recent decade. We will show that the “Political Conflicts” index can explain the investment drop in the 2010s.