Dynamic Analysis of the Determinants of the Economic Misery Index in Iraq (2004-2023) using ARDL Model

Abstract

This study conducts a dynamic analysis of the determinants of the Economic Misery Index (EMI) in Iraq from 2004 to 2023 using the Autoregressive Distributed Lag (ARDL) model. The primary objective of the research was to examine the relationship between EMI and various economic and institutional variables, with the aim of understanding their short- and long-term effects. The stepwise regression method was used to exclude variables with weak influence and focus on the most significant variables in explaining the Economic Misery Index. Based on this analysis, the results revealed that among the most influential economic variables affecting the Economic Misery Index, the Human Development Index ranked first. It was found that this variable hurts the Economic Misery Index in both the short and long terms, with improvements in education, healthcare, and social services directly linked to a reduction in the Economic Misery Index. The fiscal balance ratio came second, where the analysis showed a significant negative effect of the fiscal balance-to-GDP ratio in the long term. However, in the short term, the relationship was positive and significant. At the institutional level, the Government Effectiveness Index was found to have the greatest impact in reducing economic misery. This index reflects the government's ability to deliver public services effectively and enhance the efficiency of government management, which has a positive effect in alleviating citizens' suffering. The Political Stability and Absence of Violence Index ranked second among the institutional variables, with the analysis showing that a stable political environment plays a significant role in reducing the level of economic misery, highlighting the importance of political stability in supporting economic stability in the country.