The Impact of Exports, Imports, Foreign Direct Investment, and Trade Openness on Economic Growth in Iraq: Evidence from the ARDL Approach (2004–2024)

Abstract

The purpose of this study is to investigate the impact of exports, imports, foreign direct investment (FDI), and trade openness on economic development in Iraq in the period 2004-2024, using the ARDL Bounds Testing approach and Error Correction Model (ECM). Data is taken from the World Bank, IMF, and Central Bank of Iraq on an annual basis. The selected ARDL model was the ARDL (1,2,2,2,2) model based on the AIC, and the F-statistic was 46.168, which indicates that the cointegrating relationship between all variables is stable in the long run.

The results confirm that both the export and import volumes have significant long-run impacts on GDP with positive and negative signs, respectively, whereas in both cases, trade openness has a similar negative long-run effect. The long-run coefficient of FDI is negative, but small. The ECT is statistically significant and equals −0.6447 (p < 0.001), which indicates that there is an approximate correction of 64.47% of the short-run disequilibrium within 1 year. In the short run, exports have a positive and imports have a negative impact on GDP at the same time.

The model has a good fit (R² 0.9987), no serial correlation, and no heteroscedasticity. The results highlight the importance of diversifying the non-oil sector exports, rationalizing the composition of imported products, and improving the investment climate to ensure sustainable economic growth in the long term in Iraq.