Measuring and analyzing the impact of fiscal policy shocks on Economic Growth in Iraq for the period (1996-2019)

Abstract

The Iraqi economy is one of the economies that possesses great wealth, especially oil and gas. This has made the Iraqi economy a rentier economy based on the output of the oil sector with a shortfall in the output of the rest of the other sectors, which made the financial policy in the Iraqi economy respond directly to external shocks, and these are reflected Responding in the form of unexpected changes expressed by fiscal policy shocks, and this reflects a significant imbalance in the gross domestic product. The research relied on the descriptive and analytical approach within the framework of economic theories and the quantitative approach based on econometrics and the application of modern standard methods in order to measure and analyze the impact of fiscal policy shocks on Economic growth in Iraq for the period (1996-2019) by using the co-integration methodology, batch response functions and variance components based on the Structural Vector Autoregressive (SVAR) model. It is considered an appropriate empirical tool to understand the nature of the impact of shocks and to know the variables that contribute more than others to the fluctuations in economic activity, and the research concluded that all the variables are integrated Of the first degree and the absence of a long-term equilibrium relationship between them, and the results of the response functions proved the positive impact of a shock on public revenues and public spending on GDP in the short and medium term, but with a small multiplier, which means that the fiscal policy based on raising public spending had no The impact of improving economic growth rates, and the results of the analysis of the components of the variance in the model indicate the high relative importance of public revenues compared to public spending in explaining fluctuations in gross domestic product in the medium and long terms.