Causal Analysis of the Relationship Between Bank Credit and Economic Growth in Iraq Through the Investment Sector Using the SVAR Model
DOI:
https://doi.org/10.31272/jae.i152.1571Keywords:
Bank Credit, Investment, Economic Growth, SVAR ModelAbstract
This study examines the causal and dynamic relationships between bank credit, investment, and economic growth in Iraq, assessing the efficiency of credit transmission channels within a post‑conflict economic context. A structural vector autoregression (SVAR) model is applied to annual data from 1960–2023, employing Granger causality testing, impulse response functions, and historical decomposition to determine directional influences and quantify short- and long‑term effects of credit shocks on investment and GDP. Bank credit significantly influences investment and, to a lesser extent, GDP, though the transmission mechanism is not fully efficient or consistent; investment operates as a partial intermediary, but in some periods credit shocks have a negative structural impact, indicating inefficiencies in financial allocation. GDP growth is largely driven by its own internal dynamics, reflecting the dominance of fiscal and external factors. The findings highlight the need for targeted credit policies, institutional reform, and integrated financial–development strategies, offering an empirical framework tailored to Iraq’s conditions and policy insights applicable to other resource‑dependent developing economies.
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