The Mediating Role of Direct Cash Credit Granted by Commercial Banks in Determining the Impact Relationship between Financial Stability and Non-Oil Gross Domestic Product in Iraq for the Period (2006–2024)
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Abstract
This research examines the degree of financial stability in Iraq over the period 2006–2024 and investigates the direct effect of financial stability on Iraq’s non-oil GDP, while also assessing the mediating role of direct cash credit granted by commercial banks. The study employs annual data obtained from official sources, namely the Central Bank of Iraq and the Iraq Stock Exchange. It hypothesizes that financial stability exerts an indirect and positive influence on non-oil GDP through bank credit provided by commercial banks in Iraq during the study period. To achieve the research objectives and test the proposed hypothesis, the study adopts a deductive approach grounded in the relevant economic literature to explain the relationships among the variables, alongside descriptive analysis to develop the theoretical framework.
To test the study hypotheses and evaluate the mediating role of bank credit, a quantitative econometric framework was applied using multiple regression models incorporating mediation effects. The findings indicate that bank credit constitutes a key channel through which financial stability is transmitted to non-oil economic growth, with a strong and statistically significant effect in both the short and long run. Based on these results, the study recommends that policymakers prioritize financial stability, particularly given the evidence of its positive and significant effect on non-oil GDP in both the short and long term when the mediating variable is excluded. In addition, the findings highlight the importance of directing bank credit toward productive economic activities. After introducing the mediating variable, the model estimates show that bank credit maintains a strong and significant positive effect on non-oil GDP, while the direct effect of financial stability declines in the short run, suggesting that bank credit plays a partial mediating role.
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