Economic Strategy

Economic Strategy

The effects of monetary and fiscal policy shocks on Iran's domestic investment and its implications for resistance economic policies

Document Type : Original Article

Authors
1 Associate Professor, Department of Economics, Yazd Branch, Islamic Azad University, Yazd, Iran
2 Assistant Professor, Department of Economics, Yazd Branch, Islamic Azad University, Yazd, Iran.
3 PhD Student in Monetary Economics, Department of Economics, Abarkooh Branch, Islamic Azad University, Abarkooh, Iran
10.22034/es.2026.546938.1895
Abstract
Productive investment plays a pivotal role in achieving sustainable economic growth and realizing the objectives of the Resistance Economy. This study examines the effects of monetary and fiscal policy shocks on domestic investment in Iran. To this end, the Nonlinear Autoregressive Distributed Lag (NARDL) model is employed using annual data for the period 1973–2023. The results indicate that the effects of real bank interest rates, the reserve requirement ratio, and real tax revenues on investment are asymmetric. Specifically, positive shocks to the reserve requirement ratio exert a negative effect on investment, while negative shocks have a positive impact. Both positive and negative shocks to the real bank interest rate positively affect investment, whereas positive shocks to real tax revenues increase investment and negative shocks reduce it. Moreover, the real money supply has a symmetric and positive effect on investment behavior. The findings suggest that monetary and fiscal policies, through the effective management of macroeconomic shocks, can strengthen productive investment and thereby contribute to achieving the goals of the Resistance Economy—namely, the activation of domestic resources, entrepreneurship, and sustainable economic growth. Accordingly, the adoption of counter-cyclical fiscal policies, the redirection of liquidity toward productive sectors, and the reform of the financial structure can enhance national economic resilience and reduce dependence on external resources. Such measures would pave the way for realizing a Resistance Economy characterized by endogeneity, dynamism, and long-term stability.
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  • Receive Date 13 September 2025
  • Revise Date 20 October 2025
  • Accept Date 21 November 2025