Measuring and Analyzing the Impact of Global Oil Price Fluctuations on the Gross Domestic Product in Iraq for the Period 1990-2019

Abstract

The study examines the impact of global oil price changes on economic growth in Iraq for the period of 1990-2019 using the ARDL model. The gross domestic product (GDP) is used as a proxy for economic growth. The results indicate the presence of a long-run and short-run equilibrium relationship between oil price changes and economic growth in Iraq, meaning there is a long-term and short-term balance between the two variables. The long-run parameters suggest a negative relationship between oil prices (OP) and GDP, indicating that a one-unit change in OP leads to a 0.17% change in GDP, holding other factors constant.

Similarly, the short-run parameters show a negative relationship between OP and GDP, indicating that a one-unit change in OP leads to a 0.36% change in GDP, with a significance level of 0.0020Prob. The estimated error correction term (UECM) has a negative value of -0.15, indicating a significant and negative relationship, with a probability of 0.0214Prob. This reflects the existence of a short-run equilibrium relationship between the variables, moving towards a long-run equilibrium. The UECM value suggests that about 15% of the short-run imbalance in GDP from the previous period (t-1) can be corrected in the current period (t) towards the long-run equilibrium due to a shock or change in the independent variable.

Finally, the study recommends the need to activate the contribution of other sectors to the gross domestic product as a buffer against the impact of global oil price shocks on economic growth in Iraq.