Analysis of the Relationship Between Oil Shocks and Macroeconomic Stability in Iraq for the Period (2000-2025)
An Econometric Study Using the (SVAR) Model
DOI:
https://doi.org/10.61704/pr.726Keywords:
Oil Shocks, General Budget, Macroeconomic Stability, Structural Vector Autoregression ModelAbstract
This study aims to analyze the impact of external oil shocks on macroeconomic stability in Iraq, with a particular focus on the role of the public budget, represented by government expenditure, as a major transmission channel through which oil price fluctuations affect economic growth, inflation, and unemployment. The study employs both the descriptive-analytical approach and an econometric approach using the Structural Vector Autoregression (SVAR) model, based on quarterly data covering the period 2000–2025, with a total of 104 observations. The results of the impulse response functions and variance decomposition analysis indicate a strong relationship between oil shocks and government expenditure. They also show that the effects of oil shocks on gross domestic product, inflation, and unemployment are transmitted largely through the fiscal channel. The findings suggest that increases in oil revenues contribute to higher economic growth and improved employment levels in the short run, while at the same time generating inflationary pressures due to the expansion of public spending. The study recommends adopting more disciplined fiscal rules, strengthening the role of sovereign wealth funds, and diversifying non-oil revenue sources in order to reduce the impact of oil price fluctuations and support macroeconomic stability in Iraq.
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Copyright (c) 2026 Islam M. Mahmood
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Copyright © 2025 by the authors. This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY-NC-ND 4.0). You may not alter or transform this work in any way without permission from the authors. Non-commercial use, distribution, and copying are permitted, provided that appropriate credit is given to the authors and Al-Hadba University.
