The Relationship between Financial Development and Private Investment in Iran Economy

Financial system Development and private investment growth are both as the accelerator of the economic growth. This implies that these two factors can increase economic growth through enhancing each other. In this study we examine if there is such interaction and significant relationship between financial development and private investment in Iran economy. According to the findings of the cointegration tests, there is a statistical significant relationship between financial development and private investment in economy of Iran in long term but not in short term. This means that private investment requires a developed financial system that preserves it’s stability during a long period. Furthermore, if the private investment experiences a stable growth trend in a long term, then it can increase financial development.