The Impact of Trade Shock on GDP in Iraq Using Impulse Response Function for the Period (2004-2022)

Abstract

The research aims to estimate the impact of the trade shock on both sides of exports and imports on the Iraqi GDP during the period (2004-2022), using the impulse response functions (IRF) to clarify the extent of the GDP's response to the occurrence of the trade shock in the Iraqi economy. Therefore, descriptive and inferential analysis was relied upon on the one hand, and on the other hand, standard analysis was used to estimate the most appropriate model to diagnose the impact of this shock on the output. The research found that the exports variable had a positive impact on the Iraqi GDP by 57.9%, as a result of the occurrence of any positive trade shock on the exports side due to the rise in crude oil prices, which will be reflected positively on the GDP. The impact of the imports variable shock was also positive on the GDP by 9.7%, due to the association of most imports with the pattern The behaviour of the Iraqi consumer, who may not be affected much by changes in the prices of imported goods. Also, the results of the impulse response functions (IRF) of the ARDL model showed that in the event of a trade shock to the export side, it will lead to a positive change in GDP, after which the output stabilizes in the seventh year of the trade shock. As for the trade shock to the import side, the GDP will change positively, but at a lower level than the shock in exports, after which the GDP stabilizes between the fifth and sixth years of the trade shock.