The Impact of Inflation on Private Investment in the Agricultural Sector in Iran

 

Volume 4, Issue 3, Number 1, Pages 16-27, Published Online July 20, 2016

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Author(s):

Nasim Masoudi

ABSTRACT:

Investment and capital accumulation resulting from it, is the key to economic growth in any country. Private sector investment is not only a component of aggregate demand, but also more importantly it is a source of growth and employment opportunities in the future. The agricultural sector is one of the most important economic sectors of the country; therefore investment in this sector is of particular importance. In this regard, it should be noted that private sector investment is an important parameter in the development of the agricultural sector. One of the important variables affecting private investment is inflation. In this paper, we are investigating the impact of inflation on private investment in agriculture of Iran. For this purpose, using time series data (2012-1972) and using Self-explanatory with extensive Lag (ARDL), we discussed estimating the private investment function in agriculture. The results showed that growth of value-added has a positive relationship with inflation of agricultural products which suggests that in inflationary conditions of investment in agricultural sector, prices will increase by taking advantage of this increase in gains. Thus, the increase of wholesale prices of agricultural products compared to wholesale price of all goods is an incentive for agricultural investment rather than a limitation. Change in the balance of the banks has a positive relationship which shows that banks performance was in line with the injection of resources towards productive activities and the real exchange rate had a negative relationship with investment.

KEYWORDS:

Inflation, Private investment, Agricultural sector, ARDL method.

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