The Effect of Public Expenditure and Macroeconomic Uncertainty on the Private Sector Investment in Iran

One of the foundations for development and economic growth is the expansion of private sector investment. It is necessary to pay attention to the relevant variables in this regard and to examine their role. Therefore, this study examines the role of macroeconomic uncertainty and public expenditure in determining private investment in Iran based on seasonal and annual data during 1368-1394. For this, first, the macroeconomic uncertainty was extracted using stochastic volatility model. Then, to investigate the effect of macroeconomic uncertainty and public expenditure on private investment, we usedMixed frequency Data Sampling (MIDAS) approach. The results showed that the increase of macroeconomic uncertainty as well as the increase of GDP have negative and positive effectson the private sector investment in Iran, respectively. Furthermore, the public consumption expenditure has a negative and significant effect on private sector investment and significant effect on private sector investment and significant effect on private sector investment