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The Impact of Financial Sanctions on Capital Inflow and Outflow (case of Iran)

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  • Heydarian, Samira
  • Pahlavani, Mosayeb
  • Mirjalili, Seyed Hossein

Abstract

The paper aims to examine the impact of financial sanctions on capital inflow and outflow in Iran. The research question is about examining the effect of financial sanctions on FDI inflow and capital outflow in Iran. We used the intervention model as an econometric method to estimate the impact during 2005-2019. The paper discussed three periods. From 2005 to 2010, severe financial sanctions negatively affected FDI, and capital outflow was positive. From 2011 to 2015, severe and multilateral financial sanctions were implemented, adversely affecting FDI. There is a positive relationship between financial sanctions and capital outflow. In the third period, i.e., 2016-2019, when financial sanctions and implementation of JCPOA and the withdrawal of the United States happened, the overall effect on FDI inflow is negative. Although Iran absorbed about $2 billion of FDI, with the withdrawal of the United States from JCPOA and the return of secondary U.S. sanctions, the reduction of FDI happened again. On capital outflow, the sanction has a positive effect on capital outflow. Altogether, during 2005-2019, financial sanctions adversely affected FDI inflow and increased capital outflow in Iran.

Suggested Citation

  • Heydarian, Samira & Pahlavani, Mosayeb & Mirjalili, Seyed Hossein, 2022. "The Impact of Financial Sanctions on Capital Inflow and Outflow (case of Iran)," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 17(1), pages 67-88.
    • Handle: RePEc:zbw:espost:265302
    DOI: 10.29252/jme.17.1.67
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    References listed on IDEAS

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    1. Emre Hatipoglu & Dursun Peksen, 2018. "Economic Sanctions and Banking Crises in Target Economies," Defence and Peace Economics, Taylor & Francis Journals, vol. 29(2), pages 171-189, February.
    2. Heydarian, Samira & Pahlavani, Mosayeb & Mirjalili, Seyed Hossein, 2021. "Financial Sanctions and Economic Growth: An Intervention Time-series Approach," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 51(1), pages 1-14.
    3. Gurvich, Evsey & Prilepskiy, Ilya, 2015. "The impact of financial sanctions on the Russian economy," Russian Journal of Economics, Elsevier, vol. 1(4), pages 359-385.
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