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Purpose of the research: This paper examines the relationship between capital formation and economic growth in IR Iran during the period 1974-2014. Considering unique structure of Iranian economy developed by five-year plans under certain period of sanction, we should compare different economic growth theories (marxian, keynesian and neo-classical). With respect to second larger oil producer (even in mentioned condition) we could simplify analysis on theories validation on single factor economy, but the main focus still remaining on possibilities of structural reforms and impact of capital formation.
Methodology: We use 7 variables grouped in main factors in growth models - capital, labor and technology. For establishing short and long-run equilibrium to explain effects on GDP pc we deployed ARDL model. For testing stationary of variables under ARDL we use AFD (Augmented Dickey-Fuller) test. All variables was taken in form of logarithm show as non-stationary on first difference. Since FDI inflow has some negative values, we added new variable to complement results. As dummy variable we use periods 1978-1988 which represent Iraq-Iran war, and 2004-2014 as period of tightened economic sanction. ARDL models are selected by AIK and SIC criteria, with more precise results with SIC.
Results: Our model is long-run model that examine capital formation to economic growth. As capital from external sources we choose realization of export of goods and services, where 1% increase lead to 0,29%, while net FDI inflow shows significance but low impact (-,025). Internal sources of capital boost economic growth gross fixed capital formation by 0,27%, while other variable shows insignificances. Highest significance shows labor force with the same high negative effect, greater than all capital variables together. This should suggest high insufficient of capital in IR Iran.
Keywords: Strategic management, Modern management tools, Official statistics
JEL classification: C40, C80, E01
(ProQuest: ... denotes formulae omitted.)
Background
Almost all-economic theory of economic growth has been determined Harrod-Domar Model. These models include: a simple Keynesian macroeconomic growth model, Leontief's Input/Output model, the social accounting matrix, general equilibrium models, and cost benefit analysis approach. Intellectual progress in the development of theoretical and empirical views on economic growth keep pace with the improvment of economic mathematical tools that can process data. In general, forecasting models can be subsumed into three branches: causal...