Estimation of causal relationship between gross fixed capital formation in agricultural sector and economic growth in Iraq during 2000-2019

Abstract

Gross fixed capital formation is considered as the main element in the process of economic growth, however, despite all the capability enjoyed by the Iraqi economy, especially the agricultural sector, we found that its contribution to the gross domestic product (GDP) is very weak, not exceeding at best 5%. This will create an economic problem in providing the internal needs, which is a cause for increasing imports and thus will affect the balance of payments. It was, therefore, necessary to highlight on the study of the causal relationship between the gross fixed capital formation in the Iraqi agricultural sector and the gross domestic product as an indicator of economic growth. Hence the importance of this study is for the period of 2000-2019, as a critical period in the Iraqi economy, since it witnessed many political and economic variables. This study focused on following the analytical and standard methods in finding the relationship between the gross fixed capital formation in the agricultural sector (as an independent variable) and the gross domestic product at fixed prices (as a dependent variable). The results of the statistical analyses indicated that there is no correlation between the growth rates of the gross domestic product and the growth rate of the gross fixed capital formation in the agricultural sector. One of the results of the statistical analysis shows the coefficient of determination (R2), which reflects the interpretative capacity of the model, exhibiting that 33% of the alterations in the gross domestic product are due to the gross fixed capital formation and it is a weak proportion.

Keywords

• gross fixed capital formation
• economic growth
• gross domestic product