The Impact of Foreign Direct Investment on Gross Domestic Product in Iraq During the Period (2006 - 2015)

Abstract

The paper aims at examining the impact of Foreign Direct Investment on Gross Domestic Product in Iraq over the period 2006-2015. Data have been collected from the World Bank database. For the purpose of analyzing data, the study applied Foreign Direct Investment (FDI) Net Inflows as an independent variable while Gross Domestic Product (GDP) as a proxy for economic growth as a dependent variable. The results of the study found that all of the variables under study are non-stationary at the level while stationary at first differenced by utilizing unit-root tests (ADF). The findings of Johansen Test for Co-integration showed that there is no long-term relationship among variables. Other findings of the paper revealed that, in short term, it is concluded that FDI Granger-Causes GDP and there is a short-run causality running from FDI to GDP. The research recommended that Iraq has to pay more attention to improve the level of education sectors and financial sector and to empower human capital. It also has to decrease lending rate, transportation and instability terms of political and economic environment as well as to improve liberalized market environment.