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Comparative Analysis of the Effects of Industrial and Macroeconomic Variables on the Performance of Iran's Industrial Sector: VAR Approach | ||
| پژوهشنامه اقتصاد کلان Macroeconomics Research Letter | ||
| Article 4, Volume 20, Issue 47, September 2025, Pages 83-106 PDF (801.16 K) | ||
| Document Type: Scientific paper | ||
| DOI: 10.22080/mrl.2025.28611.2158 | ||
| Author | ||
| Farideh Khodadadi* | ||
| ssistant Professor of Economics, Shahid Beheshti University | ||
| Receive Date: 10 February 2025, Revise Date: 16 October 2025, Accept Date: 10 November 2025 | ||
| Abstract | ||
| The aim is to investigate the dynamic effects of foreign direct investment and macroeconomic shocks on the performance of Iran's industrial sector during the period 1984 to 2024, using a Vector Autoregression model. The study was conducted in the form of two comparative models. The first model analyzes the effect of intra-industrial sector variables, including the industrial sector's share of foreign direct investment (FDII), industrial exports and imports, and fixed capital formation in the industrial sector, on industrial value-added growth; the second model evaluates the impact of macroeconomic variables such as total foreign direct investment, total fixed capital formation, exchange rate, inflation, and total exports and imports. The results show that the effects of industrial variables on the industrial sector's performance are stronger in terms of magnitude and duration than the effects of macroeconomic variables. In the first model, a positive shock to FDII and industrial fixed capital formation led to a significant and relatively stable increase in the industrial sector's performance, while the effect of total FDI and total fixed capital formation in the second model was weaker and shorter-term. Also, a positive shock to industrial exports had an immediate and relatively stable effect, while the effect of total exports was smaller and shorter-term. An inflation shock had a negative effect on the industrial sector's performance in both models, but its intensity was greater in the industrial model. A positive exchange rate shock in both models had a short-term positive effect and an adjusting long-term effect, with the difference that the industrial model's reaction was more severe. An examination of future trends shows that the growth of the industrial sector will decrease in 2025, reaching approximately 0.5%, but with the adjustment of restrictions in subsequent years, it will increase to 0.8% (2026), 1% (2027), and 1.2% (2028), respectively. | ||
| Keywords | ||
| Growth of the industrial sector; foreign direct investment; fixed capital formation; vector autoregression model; Iran | ||
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