Economic Uncertainty and Investment in Iran: Evidence of Asymmetric Effects

Document Type : Research Article

Authors

1 Ph.D. Student in Economics, Department of Economics, Faculty of Economics, Management and Administrative Sciences, Semnan University, Semnan, Iran

2 Associate Professor, Department of Economics, Faculty of Economics, Management and Administrative Sciences, Semnan University, Semnan, Iran.

3 Associate Professor, Department of Theoretical Economics, Faculty of Economics, Allameh Tabataba’i University, Tehran, Iran.

10.22034/jepr.2025.144167.1289

Abstract

Investment acts as the engine of economic growth, playing a vital role. However, the Iranian economy has witnessed a downward trend in investment in recent years. Economic uncertainty, particularly under sanctions and political instability, is one of the most significant factors dampening investment incentives in developing economies. This study asymmetrically analyzes the impact of economic uncertainty on investment in Iran. To achieve this objective, it employs a novel "economic uncertainty-related queries" index. This index, designed based on internet search data, provides a quantitative reflection of structural and cyclical instabilities in the Iranian economy over the last two decades and shows a significant correlation with historical peaks of heightened uncertainty (such as sanctions, and political and economic shocks). Using seasonal data (2009-2023) and a Nonlinear Autoregressive Distributed Lags (NARDL) approach, the findings indicate that investment exhibits asymmetric sensitivity. This manifests as a strong reaction to increases in economic uncertainty (with a significant negative effect) and relative indifference to its decreases (with an insignificant coefficient). Furthermore, economic growth has a positive effect on investment, and the interest rate also demonstrates an asymmetric impact. The distinctive advantage of this research lies in its use of the NARDL methodology to identify asymmetric effects and the novel economic uncertainty index, which enables a more realistic analysis of investment behavior under unstable conditions.

Keywords

Main Subjects

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History

  • Receive Date: 27 July 2025
  • Revise Date: 05 December 2025
  • Accept Date: 15 December 2025
  • Publish Date: 21 March 2026

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