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What determines private investment in Iran?

  • Economics


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.

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