The effect of public expenditures and foreign direct investments on economic growth: The case of Iraq

The correlation between public expenditures, Foreign direct investments and economic growth are closely linked crucial for development and stability of an economy. Public expenditures on infrastructure, education, and healthcare create an enabling environment that attracts foreign direct investments by enhancing productivity, reducing operational costs, and increasing the availability of skilled labor. In turn, foreign direct investments bring in capital, technology, and expertise, fostering innovation and industrial growth. This symbiotic relationship accelerates economic growth by boosting employment, enhancing competitiveness, and increasing economic growth. Effective public spending amplifies the benefits of foreign direct investments, creating a virtuous cycle that drives sustained economic development and prosperity. In this thesis, the effects of public expenditures and foreign direct investments on economic growth for Iraq for the years 1973-2022 were examined. The data used in the analysis were obtained from the official website of the World Bank. The ARDL model was used to examine the relationship between the variables and the Toda-Yamamoto method was used to examine causality. According to the findings, a long-term significant and negative relationship was found between the variables, while a bidirectional causality relationship was found between the dependent variable, economic growth, and the independent variables. Keywords: ARDL, Economic growth, Foreign direct investments, Public expenditures