The Effectiveness of Foreign Trade on Selected Macroeconomic Indicators in Iraq for the Period 2004–2023: An Empirical Study

Overview & Synopsis

This research aims to shed light on the effectiveness of foreign trade on selected macroeconomic indicators in Iraq during the period 2004–2023. To achieve this objective, the study employed a deductive approach that integrates both a theoretical descriptive method based on economic theory and a quantitative method through the use of the Autoregressive Distributed Lag (ARDL) model. This model was applied to measure the impact of foreign trade on several key macroeconomic indicators. The findings revealed that foreign trade plays a significant role in influencing macroeconomic indicators over the study period. Specifically, the highest level of effectiveness in changes to public expenditure was attributed to trade openness, which accounted for 66% of the total short-run impact. This was followed by the effectiveness of total exports at 36%, and total imports at 25%. Conversely, the highest impact on inflation rate fluctuations stemmed from total imports, which contributed 273% of the total short-run effect. This was followed by total exports, with a short-run impact of 76%, and trade openness with 62% of the total short-run effect on inflation. Based on these results, the study concludes with a set of recommendations aimed at diversifying Iraq's oil and non-oil exports and emphasizing the development of productive sectors to reduce dependency on imports, particularly consumer goods. Such measures are essential to address the structural issues facing the Iraqi economy and to achieve real growth rates and sustainable development.