(Case study: Iran and selected developed countriesDirect Investment and Exports Based on the Pendulum Gravity The Study of Dynamic Relationship Between Outward Foreign Model (Case Study: Iran and Selected Developed Countries)

Document Type : Research Paper

Authors

1 Institute of Golestan higher education

2 University of Mazandaran

Abstract

In this study, we have used the pendulum gravity model for exploration of relationship between outward foreign direct investment (OFDI) and exports. Unlike the traditional and static gravity model in which we can only approve one of the complementary or substitute relationships, the pendulum gravity model can conclude both the complementary and substitute relationships, in the form of a dynamic relationship and depending on the development stage of OFDI. In this regard, for reflecting the stages of OFDI undertakings and testing the relationship between OFDI and exports, we have formed two scenarios. Accordingly, we have selected two panel data sets, so that the opposite sides of each set are in different stages of FDI development. In one side, Iran as a developing country, and in the other side, 11 developed and high-income countries are considered. The results of the estimation of export model with origin of Iran (first scenario) demonstrated that Iran’s direct investment in developed countries is a complementary of Iran’s export as a developing country and with high ratio of the export to outward FDI. In addition, the results of the estimation of export model with origin of high-income countries (second scenario) showed that the outward FDI of these countries in Iran substitute their exports as developed countries and with less ratio of the export to OFDI

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References

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History

  • Receive Date: 06 August 2017
  • Revise Date: 02 November 2017
  • Accept Date: 14 November 2017

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