This article examines the relationships between government expenditures (current and capital) and private investment over the period of 1959- 2007 in Iran. To examine the long and short run relationships between model variables, the dynamic auto regression approach with distributed lag (ARDL) and the standard Granger causality relationship has been used. Findings indicate that based on long and short run Granger causality relationship there is a one way causality relationship from economic growth and Banking Credits to increasing Private investment expenditures. Also there is both in long and short run, a one way Granger causality relationship between government capital expenditures and inflation to reduce Private investment expenditures. Finally, there is no causality relationship between government current expenditures with private investment expenditures.

Keywords: Government capital expenditures, Government Current expenditures, Private Investment, Auto Regression Approach with Distributed Lag (ARDL), Granger Causality Relationship.

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