authors
Zeina Tariq Ali Neama

abstract
This study explores Iraq’s economic trajectory from 2000 to 2024, focusing on the interplay between key macroeconomic variables: interest rates, exchange rates, foreign direct investment (FDI), and growth in the non-oil sector. Employing the Autoregressive Distributed Lag (ARDL) approach, the analysis captures both immediate and lagged effects among these variables. The ARDL bounds test provides evidence of long-run cointegration, pointing to stable equilibrium relationships over time. Empirical findings indicate that interest rates negatively influence GDP, while fluctuations in the exchange rate significantly affect both non-oil sector growth and inflation dynamics. The effects of FDI are mixed, shaped by conditions in both the interest and exchange rate environments, with lagged values suggesting persistent impacts. In the short run, the models reveal significant error correction terms, suggesting a rapid adjustment process toward long-run equilibrium. Diagnostic checks confirm the robustness of the model specifications, showing no evidence of serial correlation, heteroscedasticity, or non-normality of residuals. The results underscore the importance of both responsive short-term macroeconomic management and long-term structural reforms. Policy recommendations derived from these findings emphasize the necessity for balanced interest rate management, exchange rate stabilization, economic diversification beyond the oil sector, and the cultivation of a more attractive investment climate. Such measures are deemed essential for fostering sustainable economic growth, ensuring macroeconomic stability, and enhancing Iraq’s economic resilience.