The impact of government consumer spending on the position of the trade balance in Iraq for the period (2005-2020) using the VECM model

Abstract

The Iraqi economy depends on foreign trade to meet local demand for goods due to the increase in public consumer spending linked to rentier oil revenues and the inability of the production system to keep up with this demand. Because the elasticity of government consumer spending is high in the direction of an increase in the level of public revenues and low in the direction of a decline in the level of public revenues , this is reflected in the form of a deficit in the trade balance , and this deficit is caused by an imbalance in government spending , with government consumer spending occupying the largest proportion compared to investment spending and the trade balance due to the dominance of exports from crude oil , which is used to finance public spending in exchange for diversification of imports. The study aims to measure and analyze the impact of government consumer spending on the trade balance by adopting the analytical and quantitative method using the vector error correction model (VECM). The study found a long-term relationship between the study variables.