The Effect of Financial Expenditures on Private Investment in Iran: Testing C.O.E Hypothesis (in Persian)

Mahmoud Mahmoud-zadeh (), Somayyeh Sadeghi () and Sorayya Sadeghi ()
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Mahmoud Mahmoud-zadeh: Iran
Somayyeh Sadeghi: Iran
Sorayya Sadeghi: Iran

The Journal of Planning and Budgeting (٠صلنامه برنامه ریزی و بودجه), 2011, vol. 16, issue 2, 131-146

Abstract: Government’s financial expenditures have an outstanding effect on the private sector’s investment and they are regarded as a powerful tool for the growth and economic stability policies. This article tries to study the effects of government’s financial expenditures (current and capital expenditures as well as budget deficit) on private investment in Iran on the basis of crowding out effect hypothesis, using vector auto regression methods and error correction model within 1971 - 2008 The results demonstrate that the increase in government’s current expenditures causes crowding-out effect on private investments while increasing governments investment expenditures and governmental investments in the infrastructures have crowding-in effect on private investments. Meanwhile according to the results of the study, budget deficit has negative impact on private investments in Iran. Eventually the general result of the study holds that financial discipline in current expenditures and public investment development could strengthen private investments

Keywords: Crowding-out Effect; Crowding in Effect; Financial Expenditures; Private Investment (search for similar items in EconPapers)
Date: 2011
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