Examining the effect of bank interest rate and its instability on Private Sector Investment in Iran.

Document Type : Original Article

Authors

1 Department of Islamic Economics, Faculty of Economics and Management, Qom University, Qom, Iran

2 Qom

Abstract

The purpose of this study is to investigate the effect of bank interest rates and its instability on private investment in Iran for the period 1981 to 2016. The issue under consideration is of particular importance in terms of the position of the private sector and the role of investment in economic development programs. In this study, in order to investigate the long-term relationship between variables in order to use time series data, after performing stationary tests, the model was estimated using autoregressive distributed lag model (ARDL), which is based on There is a long-term relationship between variables. The results show that exchange rate, interest rate, interest rate instability and inflation rate have a negative and significant effect on private investment in Iran. The amount of liquidity has a positive and significant effect on private investment in Iran. Also, the growth rate of real GDP has a positive effect on private investment, but it is not significant. also, the estimated ECM coefficient in the model is negative and smaller than one, which confirms the convergence in the model, indicating that 58% of the imbalances are corrected in each period. Accordingly, the monetary authorities in Iran should act in a way that does not destabilize this interest rate and consider all aspects of the matter.

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