Iraq’s Economy: Openness and Growth

This paper tried to investigate the impact of openness to trade on the economic growth of Iraq. To do that, we used annual time-series data from the period of 1980 to 2014 and the economic growth variable was regressed on the openness variable with a set of control variables; government expenditure, industry investments value, oil utilization value per capita, capital inflow and an interaction variable of capital inflow with structural dummy of 2003 and dummies for the effect of 1991 gulf war, 2003 US invasion to Iraq and 2003 transition to democratic government after overthrown of Saddam‟s reign as well. We also employed the Ordinary Least Square (OLS) method for the estimation. The result of this research showed a support to the growing number of empirical researches for different economies, which confirmed the positive and significant relationship between economic growth and openness to trade. Another major finding is that the 1991 Kuwait War and the invasion of Iraq by the US in 2003 have largely and negatively affected the Iraqi economic growth. Moreover, the structural changes after Saddam‟s reign as from 2003 have a positive impact on the economic grow path of Iraq. The study also finds that foreign capital investment imposes a positive impact on the economy after the infrastructural changes made as from 2003. Keywords: openness and growth of Iraq, Iraq‟s economy growth.