Economics Research

The effect of oil rent on the motivation of foreign direct investment in Iran

Articles in Press

Document Type : Research Paper

Authors

shahryar zaroki 1
Saeed Rasekhi 2
Leila Asghari 3

1 Associate Professor in Energy Economics, Faculty of Economic and Administrative Sciences, University of Mazandaran, Babolsar, Iran

2 Professor in Energy Economics, Faculty of Economic and Administrative Sciences, University of Mazandaran, Babolsar, Iran.

3 MA Student in Energy Economics, University of Mazandaran, Babolsar, Iran.

https://doi.org/10.22054/joer.2026.89895.1309
Abstract
Oil, as the primary source of foreign exchange and a crucial factor in securing Iran's government budget, plays a crucial role in the country's economic and social development. However, excessive dependence on oil revenues has resulted in budget deficits, economic fluctuations, and phenomena such as the "Dutch disease." This study investigates the effect of oil rent on the motivation for foreign direct investment (FDI) in Iran from 1357 to 1402. The motivation for FDI was estimated using the Multiple Indicators Multiple Causes (MIMIC) model based on observable indicators and causal variables, while the effect of oil rent was analyzed using the nonlinear autoregressive distributed lag (NARDL) model. The results indicate an asymmetric effect of oil rent: increases in oil revenues enhance FDI motivation, whereas decreases do not produce an equivalent negative impact. Furthermore, factors such as research and development (R&D) and economic openness positively and significantly influence FDI incentives. In contrast, the size of government exerts a negative and significant effect, while inflation has a negative but insignificant impact on FDI attraction. These findings suggest that transparent and balanced management of oil revenues, along with the development of non-oil sectors, can boost foreign investment flows and contribute to maintainable economic growth.

Keywords

Oil Rent
Foreign Direct Investment
NARDL
Iran
Subjects
Economics Research

Articles in Press, Accepted Manuscript
Available Online from 20 September 2026

  • Receive Date 24 November 2025
  • Revise Date 19 June 2026
  • Accept Date 19 September 2026

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