What Determines Private Investment in Iran?
International Journal of Social Economics, Vol. 31, No. 5/6, pp. 457-68
Posted: 17 Apr 2005
Iran's third five-year development (2000/2001-2004/2005) has been considered a pivotal role for private investment in creating 700,000-800,000 jobs per annum to stabilise the rate of unemployment. This paper examines the long- and short-run determinants of the private investment function by employing the Johansen multivariate cointegration technique and a short-run dynamic model. Using annual data for the period 1960-2000, this paper finds, inter alia, that private investment is cointegrated with non-oil gross domestic product and the rate of inflation. It is found that a 1 per cent increase in inflation in the long run can immediately result in a 1 per cent decline in investment in the short run.
Keywords: Private investment, Cointegration, Iranian economy
JEL Classification: E41, E52, C32
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