Document Type : Research Paper
Assistant Professor of Economics, Islamic Azad University of Central Tehran Branch.
Master Graduate of Economics, University of Sanati Sharif.
Governance is a complex phenomenon that has political, economic and institutional dimensions. This study examines the direct effects of domestic terrorism and the effects of its overflow on the region, along with the macroeconomic variables of GDP, foreign direct investment and inflation on governance performance indicators, as defined by the World Bank for the Middle East, using spatial dynamic regression model. The results of the model's estimation show that terrorist attacks reduce political stability, government effectiveness, regulatory quality, rule of law, corruption and the governance indicators. The effects of the spillover of terrorist attacks in each country reduce government efficiency as well as political stability in neighboring countries. Improving the production and attraction of foreign direct investment will increase the standards of governance, such as economic freedom, social and government performance measures, and the overall governance indicator. The effects of GDP and foreign direct investment overflow in the country will improve the performance of neighboring countries in terms of political stability, government effectiveness, regulatory quality, rule of law, corruption control and the average total governance indicators