The impact of financial development on Iraqi economic growth (1970-2015)‎

Abstract EN

Financial development plays vital role in channelling financial resources toward highly productive and efficient investment opportunities.

This paper examined the potential effect of the Iraqi financial sector development on economic growth using annual data for the period 1970- 2015.

We applied principle component analysis to aggregate the financial development indicators in Iraq.

VECM estimator applied after the data are examined for unit root order, and the existence of co-integration among model variables.

The results of the estimated reduced form shows clearly positive and significant short run effect of the financial development variable on economic growth, and negative significant long run effect.

The role of the financial sector in the Iraqi economy will furthered enhanced if More development, new innovation and technology, efficient management, more freedom and government support to the private financial sector.

We strongly believe that the Iraqi financial sector will witnesses a huge expansion and development in the coming years, and will contribute positively not in the short run but in the long run too in higher economic growth.