 MODELLING THE ASYMMETRIC EFFECTS OF INFLATION ON REAL INVESTMENT IN IRAN, 1959-2008Amin Reza Kamalian, Mosayeb Pahlavani and Abbas Valadkhani Applied Econometrics and International Development, 2010, vol. 10, issue 1 Abstract: Using a threshold regression model and annual data (1960-2008), this paper examines the determinants of investment in Iran. We found that real GDP, the trade openness index and inflation can influence investment. However, the effect of inflation on investment follows an asymmetry adjustment process. The threshold value for the rate of inflation has endogenously been estimated to be at 11.9 per cent. If the annual rate of inflation exceeds this threshold, it will have a negative impact on investment. But, if inflation remains below this rate, not only the negative effect fades away but also rising prices can boost investment. Although investment exhibited a positive trend since 1990 it is not yet enough to guarantee high increases in income per capita and low rates of unemployment, given the high increase of population and labor force during the last years. We recommend economic polices geared at fostering not only public investment but also private sector investment in order to achieve the goals of higher income per capita and higher employment rates. Keywords: Investment; Threshold Regression; Iranian economy. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eaa:aeinde:v:10:y:2010:i:1_11 Ordering information: This journal article can be ordered from Access Statistics for this article More articles in Applied Econometrics and International Development from Euro-American Association of Economic Development |
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