The Impact of Oil Price on Economic Growth: Empirical Evidence from Iraq

Abstract

Iraq is one of the largest oil exporting countries in the world. Oil price changes determine government revenue earning and spending level, inflation rate, unemployment level which, in turn, determines the growth of the Iraqi economy.  Problem Statement: a decrease in oil price is beneficial to oil-importing country rather than oil exporting country like Iraq.  Significance of the study: The significance of the study comes from estimate how the changes (increase or decrease) in the price of this oil will have impacted on economic growth of Iraq. Objective: The purpose of this paper is to identify the impacts of oil price on economic growth of Iraq. Methodology: To achieve this objective (of fulfilling its full potential), the present paper adopts OLS approach, and the secondary data was used for the period of 2000-2015 and multiple regression with its assumption were used in order to analyse data.  Findings, oil price and oil export are very important determinates of economic growth in Iraq because the p-value of those were less than the common alpha α =0.05. For instance, for each unit increasing of oil price, the economic growth will increase by 36.9% after holding all other variable constant. However, we find that exchange variable has no impact on the participations of increasing the economic growth because of having corruption in public banks in Iraq.

Keywords: Oil Price, Economic growth, Economic Analysis, OLS Approach, Iraq.