Investigating the Asymmetric Effect of Public Debt on Private Investment in Iran

Document Type : Original Article

Authors

1 MA in Economics, University of Bojnord

2 Associate Professor of Economics, University of Bojnord

3 Assistant Professor of Economics, University of Bojnord

Abstract

Government debt has always been an issue in academic and policy circles. Increasing government debt can affect private investment, and this effect can vary in different economic conditions. This paper examines the asymmetric effect of public debt on private investment in Iran from 1973-2023. For this, after performing unit root tests, the relevant model was estimated using the Nonlinear Autoregressive Distributed Lag (NARDL) model. We found that there is a significant negative relationship between positive and negative changes in public debt and private investment in Iran in the long run, such that an increase in public debt leads to a decrease in private investment and a decrease in public debt leads to an increase in private investment. The results also showed that in the long run, the effect of domestic credit to the private sector on private investment is negative and significant, but the effect of interest rates on private investment is positive and significant.Government debt has always been an issue in academic and policy circles. Increasing government debt can affect private investment, and this effect can vary in different economic conditions. This paper examines the asymmetric effect of public debt on private investment in Iran from 1973-2023. For this, after performing unit root tests, the relevant model was estimated using the Nonlinear Autoregressive Distributed Lag (NARDL) model. We found that there is a significant negative relationship between positive and negative changes in public debt and private investment in Iran in the long run, such that an increase in public debt leads to a decrease in private investment and a decrease in public debt leads to an increase in private investment. The results also showed that in the long run, the effect of domestic credit to the private sector on private investment is negative and significant, but the effect of interest rates on private investment is positive and significant.

Keywords

Main Subjects

References

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Public Sector Economics Studies
Volume 4, Issue 2
July 2025
Pages 279-312

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History

  • Receive Date: 10 January 2025
  • Revise Date: 05 March 2025
  • Accept Date: 08 March 2025

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