The Impact of Oil Revenues on Iraq’s Country Economic Growth with an Emphasis on Geopolitical Risk

Abd Shamal Al-Hosani, Haidar Ali; Hashemi Dizaj, Abdulrahim; Hassanzadeh, Mohammad

The Impact of Oil Revenues on Iraq’s Country Economic Growth with an Emphasis on Geopolitical Risk

Document Type : Origional Article

Authors

Haidar Ali Abd Shamal Al-Hosani ¹

Abdulrahim Hashemi dizaj ²

Mohammad Hassanzadeh ³

¹ MSc Student, Department of Archaeology, Faculty of Social Sciences, University of Mohaghegh Ardabili, Ardabil, Iran

² Associate Professor, Department of Economics,Faculty of Social Sciences, University of Mohaghegh Ardabili,Ardabil, Iran.

³ Professor, Department of Economics, Faculty of Social Sciences, University of Mohaghegh Ardabili, Ardabil, Iran.

Abstract

Background and Objective: Oil revenues significantly affect fiscal policies, public spending, and budget management in Iraq. Studying these impacts helps policymakers assess the effectiveness of revenue management strategies such as oil revenue allocation, budget planning, and the establishment of stabilization funds. In addition, the impact of geopolitical risk on economic growth, which has been dominant in most oil-exporting countries, has become a necessity, and its results can have very important policy implications for policymakers and decision-makers at the macro level. Therefore, Iraq’s dependence on oil revenues makes understanding the effects of oil revenues on economic growth of great importance for assessing the sustainability of the Iraqi economy. The aim of this study is to examine the impact of oil revenues on Iraq’s economic growth by considering geopolitical risk. The results of the study will help identify the extent to which Iraq's economic growth is dependent on oil revenues and the possible risks associated with such dependence, along with existing risks.
Methodology: This study is of an applied type based on its objectives. Data and information in the background section were collected with a library approach, and the data and statistics required to estimate the empirical model were collected from the Central Bank of Iraq and the World Bank websites in a time series format, and the analysis of the research model was also carried out using the self-explanatory model with extended lags (ARDL). The country's macroeconomic variables in the period 1995 to 2022 are the data used in this study.
Findings and Conclusion:Based on the results of the model estimation, oil revenues have a positive and significant effect on economic growth in the short and long term, and the effect of geopolitical risk and the interactive effect of geopolitical risk on oil revenues are negative and significant in the long term on economic growth. The results also show a positive and significant impact of foreign direct investment on economic growth. Oil revenues as a major source of income can lead to an increase in the government budget, domestic and foreign investment in infrastructure, improvement of public services and creation of job opportunities in various economic sectors. However, political tensions and instability and geopolitical risk can reduce investment, reduce production and consequently reduce economic growth. Therefore, the government should adopt policies that reduce negative factors and increase factors that enhance economic growth.

Keywords

Oil revenues

economic growth

geopolitical risk

Iraq’s Country

Subjects

Sustainable Regional Development

Abdelsalam M.A.M. (2020). Oil price fluctuations and economic growth: the case of MENA countries. Review of Economics and Political Science. 2020. DOI: 10.1108/REPS-12-2019-0162

Acemoglu, D., Johnson, S., & Robinson, J. A. (2021). The colonial origins of comparative development: An empirical investigation. The American Economic Review, 91(5), 1369-1401. https://www.aeaweb.org/articles?id=10.1257/aer.91.5.1369

Ahmad N., Du L. (2017). Effects of energy production and CO2 emissions on economic growth in Iran: ARDL approach. Energy. 2017;123:521–537. https://doi.org/10.1016/j.energy.2017.01.144

Akinsola M.O., Odhiambo N.M. (2020). Asymmetric effect of oil price on economic growth: panel analysis of low-income oil-importing countries. Energy Rep. 2020;6:1057–1066. https://doi.org/10.1016/j.egyr.2020.04.023

Al-Khazaleh, Suhaib & Zoghlami, Feten & Jwair, Alaa. (2024). Using the ARDL Approach, Measure the Impact of Global Oil Price Fluctuations on Foreign Reserves. Cuadernos de Economía.47(133):153-165. DOI:10.32826/cude.v47i133.1315

Al-mulali. , Chermoree, C. (2010). “ he Impact of oil shoc s on Qatars GDP,” MPRA Paper 27822, unidersity Library of Munich, Germany, Revised 31Dec. https://mpra.ub.uni-muenchen.de/27822/1/MPRA_paper_27822.pdf

Asaad, Z. A. (2021). Oil Price, Gold Price, Exchange Rate and Stock Market in Iraq Pre-During COVID19 Outbreak: An ARDL Approach. International Journal of Energy Economics and Policy, 11(5), 562–571. https://www.econjournals.com/index.php/ijeep/article/view/11552

Awartani B., Aktham M., Cherif G. (2016). The connectedness between crude oil and financial markets: evidence from implied volatility indices. Journal of Commodity Markets. 4(1):56–69. https://doi.org/10.1016/j.jcomm.2016.11.002

Badeeb, R., A., Kenneth, R., Szulczyk, H., and Hooi, L. (2021). Asymmetries in the effect of oil rent shocks on economic growth: A sectoral analysis from the perspective of the oil curse, Resources Policy 74(2):102-119. https://doi.org/10.1016/j.resourpol.2021.102326

Belarbi,Y; Souam, S; Sami, L. (2015). The Effects of Institutions and Natural Resources in Heterogeneous Growth Regimes, Journal of Economic Policy, 17(2): 189-205. https://ideas.repec.org/a/taf/rmdjxx/v8y2016i2p248-265.html

Bibi A., Zhang X., Umar M. (2021). The imperativeness of biomass energy consumption to the environmental sustainability of the United States revisited. Environ. Ecol. Stat. 2021 doi: 10.1007/s10651-021-00500-9.

Bildirici M., Guler Bayazit N., Ucan Y. (2020). Analyzing crude oil prices under the impact of covid-19 by using lstargarchlstm. Energies.;13(11):2980. https://doi.org/10.3390/en13112980

Bouri E., Demirer R., Gupta R., Pierdzioch C. (2020). Infectious diseases, market uncertainty and oil market volatility. Energies. 2020;13:4090. http://hdl.handle.net/2263/76479

Caldara D, Iacoviello M.(2022). Measuring geopolitical risk. American Economic Review2022;112(4): 1194–225. https://doi.org/10.1257/aer.20191823

Carney, Richard W. and El Ghoul, Sadok and Guedhami, Omrane and Wang, He,(2023) Geopolitical Risk and the Cost of Capital in Emerging Economies, http://dx.doi.org/10.2139/ssrn.4627125

Das S. (2021). The time–frequency relationship between oil price, stock returns and exchange rate. Journal of Business Cycle Research. 2021:1–21. DOI: 10.1007/s41549-021-00057-3

Demir, E., Gozgor, G., & Paramati, S.R. (2019). Do Geopolitical Risks Matter for Inbound Tourism? Eurasian Business Review, 9 (2), 183–191. DOI: 10.1007/s40821-019-00118-9

Elneel, F., A., and AlMulhim, A., F. (2022). The Effect of Oil Price Shocks on Saudi Arabia’s Economic Growth in the Light of Vision 2030 “A Combination of VECM and ARDL Models”. Journal of the Knowledge Economy, 13(1): 1-23. DOI: 10.1007/s13132-021-00841-7

Fathi, Sarvodin, Nunjad, Masoud, Zare, Hashem, Haghighat, Ali (2019) A study of the asymmetric effects of oil price shocks and trade openness volatility on economic growth and inflation in selected member countries of the Islamic Conference, Quarterly Journal of Energy Economics Studies, 19(78):103-129. .(In persian)

Hashemi Dizaj, Abdul Rahim, Hassan Zadeh, Mohammad and Abdul Wahid Berij, Mojtaba. (2025). The impact of information and communication technology and the global competitiveness index on the economic growth of selected countries. Quarterly Journal of Sustainable Urban and Regional Development Studies, 6(1), 283-296.(In persian) https://www.srds.ir/article _212957.html

Hashemi Dizaj, Abdul Rahim, Hassan Zadeh, Mohammad and Meysam Javad, Mohammad Sadeq. (2025). Studying the impact of human capital on the economic development of Iraq. Quarterly Journal of Sustainable Urban and Regional Development Studies, 6(3), 186-198.(In persian) https://www.srds.ir/article_217441.html

http://iiesj.ir/article--126-1-fa.html

https://iiesj.ir/article--1446-1-fa.html

https://iiesj.ir/article--1491-1-fa.html

https://iiesj.ir/article--1548-1-fa.html

Li B, Chang CP, Chu Y, Sui B. (2020). Oil prices and geopolitical risks: what implications are offered via multi-domain investigations? Energy Environ 2020;31(3):492–516. https://doi.org/10.1177/0958305X19876092

Lu, Z., Gozgor, G., Huang, M., & Lau, C. K. M. (2020). The Impact of Geopolitical Risks on Financial Development: Evidence from Emerging Markets. Journal of Competitiveness, 12(1), 93–107. https://doi. org/10.7441/joc.2020.01.06

Mahmood, Sawsan. (2022). Using the (NARDL) model to measure the impact of crude oil price fluctuations on public spending in Iraq for the period (1970-2021). https:// https://globalresearchnetwork.us/index.php/ajebm/article/view/1247

Manuel, M; María R.R, Luis Alberiko G-A. (2023). The impact of geopolitical risk on the behavior of oil prices and freight rates, Energy Policy,Volume 269 (3): 356-378. DOI: 10.1016/j.energy.2023.126779

Mehmandousti, Elahe Asadi, Bazazan, Fatemeh and Mousavi, Mir Hossein (2019) The impact of different types of income allocation from non-renewable oil resources on Iran's economic growth, Quarterly Journal of Energy Economics Studies, 16(64):65-95. .(In persian)

Molaei, Seyed Jafar, Mousavi, Seyed Nematollah, Aminifar, Abbas (2013) Oil Revenues and Economic Growth with Emphasis on Domestic Financial Markets, Quarterly Journal of Energy Economics Studies, 19(77):97-132.. .(In persian)

Olayungbo, D.O., & Olayemi,O.F. (2018). Dynamic relationships among non-oil revenue, government spending and economic growth in an oil producing country: Evidence from Nigeria, Future Business Journal, 22(4): 246-260. https://doi.org/10.1016/j.fbj.2018.07.002

Omodero, C.O. (2019). A Relative Assessent of the Contributions of Agriculture. Oil and Non-Oil Tax Revenues to Nigeria’s Economic Expansion. Annals of Spiru Haret University. Economic Series,19(2), 139-151. DOI: 10.26458/1927

Ross, M. L. (2020). The oil curse: How petroleum wealth shapes the development of nations. Princeton University Press. www.carnegiecouncil.org

Salisu, A. A., Ogbonna, A. E., Lasisi, L., & Olaniran, A. (2022). Geopolitical risk and stock market volatility in emerging markets: A GARCH–MIDAS approach. The North American Journal of Economics & Finance, 62, 101.117. DOI: 10.1016/j.najef.2022.101755

Sweidan, O; Elbargathi, K. (2022). The effect of oil rent on economic development in Saudi Arabia: Comparing the role of globalization and the international geopolitical risk," Resources Policy, Elsevier, vol. 75(C). DOI: 10.1016/j.resourpol.2021.102469

Uddin GS, Bekiros S, Ahmed A. (2021). The nexus between geopolitical uncertainty and crude oil markets: an entropy-based wavelet analysis. Phys Stat Mech Appl; 495:30–9. DOI:10.1016/j.physa.2017.12.025

Valihi, Azadeh, Mousavi, Seyed Nematollah, Aminifar, Abbas (2013), Oil Dependence, Institutional Quality and Economic Growth: A Panel Vector Autoregression Approach, Quarterly Journal of Energy Economics Studies, 18(72): -59-87. .(In persian)