Security Expenditure and Public Order, Economic Growth and Private Sector Investment: A VAR Approach with an Application to Iran

This study uses a Vector Regression (VAR) model over the period of 9151-2..6 to investigate the dynamic interactions and relationships between government expenditure on public order and security, GDP and private sector investment for the Iranian economy. The results of impulse response functions and variance decomposition analysis indicate that an upturn in economic growth can stimulate a demand for increased government spending on public order and security. Moreover, an upturn in government spending on public order and security can encourage the private sector investment. Finally, our findings show that there is a significant bidirectional relationship between economic growth and private sector investment.