The Effect of Government Spendings on Private Investment Separation of Machines and Building Sectors in the Iran Economy (with SVAR Approach)

The relationship between governmental and private investment is a central issue in both macroeconomics and development economics. Thus, this paper studies the effects of current and development spending of government on pri? vate investment in machinery and building sectors in Iran economy over the period 1990: 2 - 2014: 1 by using the structural vector Auto Regressive (SVAR). Also this paper surveies the dynamics of system using impulse response function (IRF) and the relative importance of random impulses using analysis of variance decomposition (VD) of prediction error. The results show that both the current and development spending in the long-term have crowding-in effect (Positive effect) on private investment in machinery and they are complement (of course without budget deficit). However, the current and development spending of government have crowding-out effect (negative effect) on private investment in the building sector.