The Impact of Economic Policy Uncertainty on the Economic Growth of the Industrial Sector in Iran

Abstract: This study aims to investigate the impact of economic policy uncertainty on the economic growth of the industrial sector in Iran during the period 2000-2021. Using the Autoregressive Distributed Lag (ARDL) model, we examine the long-term and short-term relationships between economic policy uncertainty and industrial growth. The results indicate that the negative shock caused by economic policy uncertainty has a significant negative impact on the industrial sector growth rate. Furthermore, an increase in the volatility of economic policies leads to uncertainty in the investment climate and reduces the incentives for industrial production. Moreover, our findings show that the overall economic policy uncertainty index had a statistically significant negative impact on the industrial sector growth rate during the study period. Specifically, the period after 2017, which witnessed heightened economic tensions, demonstrated a more pronounced negative effect. The results of this study suggest that economic policymakers should focus on reducing policy uncertainty through stabilizing regulations and creating a more predictable economic environment. This would help foster industrial growth and improve economic performance in the sector.