Investigating the Impact of Oil Rents on Foreign Direct Investment in Iran (Vector error correction model approach)

Foreign direct investment has become a key element in linking countries' domestic economies to the global economy. The issue of attracting foreign investment for oil-exporting countries is different from other countries. Oil-dependent countries are often managed by rentier governance systems based on oil revenues, leading to uncertainty and instability in macroeconomic policies. Therefore, most of these countries have dubious institutional sovereignty and poor performance of macroeconomic variables that prevent the entry of foreign investors. Therefore, the purpose of this study is to investigate the impact of oil rents on the inflow of foreign direct investment in Iran during the period 1985-to 2018 using the vector error correction model (VECM). The results show that the oil rent variable hurts the inflow of foreign direct investment, while the variables of the institutional quality index, gross fixed capital formation, and trade openness have a positive effect on FDI absorption. According to the results of the study, in order to attract more foreign direct investors, limit and reduce the size of rentier governments and drastically reduce the dependence of the budget on oil revenues suggested that revenues from oil resources to improve the related infrastructure in all economic sectors be overflow into the .