The Interaction between Economic Diversification and Macroeconomic Stability in Iraq: An Econometric Study for the Period 2004-2022

Abstract

Economic diversification is a double-edged sword. The statistical program has proven the possibility of achieving diversification for the Iraqi economy and obtaining stability for these variables, as the dependent variables represented by the growth rate of the gross domestic product (X1), unemployment (X2) and inflation (X3), with a slower time period of one year for each of them, gave an explanatory power represented by (79%) for X1, (72.6%) for X2 and (77.2%) for X3, respectively. The estimated parameters also explained the possibility of achieving an increase in the growth rate of the gross domestic product by (0.2%) in the event of achieving diversity. As for the inflation rate, the parameter sign appeared negative, indicating the negative relationship between the rate of economic diversity at the level of the economy as a whole, which can create stability in the price rate. According to the concept of the economic equivalence theory, any increase in the rate of the gross domestic product as a result of the economic diversity of the marginalized economic sectors is likely to create a positive effect on reducing unemployment rates. Therefore, the parameter of the third variable appeared negative, decreasing by (0.2%) with each increase in the diversity of the productive sectors