Determinants of Private Investment in Iran based on Bayesian Model Averaging

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.

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