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Determinants of Private Investment in Iran based on Bayesian Model Averaging

Author

Listed:
  • Motahareh Alsadat Majdzadeh
  • Arezoo Ghazanfari
  • Mohsen Mehr Ara

Abstract

Due to the importance of investment as one of the determinants of the economic growth, in this study, the effects of 19 explanatory variables on private investment and their ranking in Iran’s economy will be examines by Bayesian Model Averaging (BMA) approach. The results show that the growth of capital imports (by probability of 1) and the growth of GDP (by probability of 0.68) are the most important factors variables in investment equation. The variable of the ratio of companies’ taxes (by probability of 0.50) comes the second-ranked. Nominal variables such as inflation rate, money growth and the ratio of bank credits to the private sector to Non-oil GDP don’t have much of importance in private sector investment. Moreover, interest rates and tax rate doesn’t have important effect on investment developments during the sample period.

Suggested Citation

  • Motahareh Alsadat Majdzadeh & Arezoo Ghazanfari & Mohsen Mehr Ara, 2014. "Determinants of Private Investment in Iran based on Bayesian Model Averaging," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(7), pages 229-240, July.
    • Handle: RePEc:hur:ijarbs:v:4:y:2014:i:7:p:229-240
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    Keywords

    Private Investment; Bayesian Model Averaging (BMA);

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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