Measuring and Analyzing the Impact of Credit Policies on Private Investment in Rentier Economies (Iraq as a Case Study)
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Abstract
This study aims to measure the impact of credit policies on private investment in the Iraqi economy and to analyze the nature of the relationship between them in both the short and long run, highlighting the role of bank credit in stimulating investment within a rentier economic context. The study employs the Autoregressive Distributed Lag (ARDL) model using monthly data for the period 2020–2024. The results indicate the existence of a long-run equilibrium relationship between private investment and each of credit to the private sector, the interest rate, and inflation. They also confirm the pivotal role of bank credit in stimulating private investment by easing financing constraints. By contrast, the interest rate does not exhibit statistical significance despite its sign being consistent with economic theory, reflecting the weak effectiveness of this channel in guiding investment decisions. Meanwhile, price instability has a negative and statistically significant effect, weakening private investment decisions. Accordingly, the study recommends adopting comprehensive credit policies that focus on expanding credit directed toward real productive activities, alongside enhancing macroeconomic stability and improving the institutional environment, in order to support private investment and achieve sustainable economic growth in Iraq.
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