Estimation and Analysis of the Agricultural Investment Model in Iraq (1990-2020) using the Autoregressive Distributed Lag Methodology

Abstract

In this research, the effects of some financial and economic determinants of agricultural investment in Iraq during the period (1990-2020) were analyzed using the autoregressive distributed lag (ARDL) methodology. In this context, agricultural loans, inflation rate, budget deficit, exchange rate, and financial allocations to support agricultural projects were chosen as determinants of agricultural investment. The problem of the research is that the Iraqi agricultural sector possesses many components and capabilities that encourage investment, but it suffers from low investments directed to it. This is not commensurate with the importance of this sector, which negatively affects the rates of agricultural development and the decline in the agricultural sector’s ability to increase the rates of self-sufficiency in agricultural products. The research aimed to know the economic determinants and the extent of their impact on investment in the Iraqi agricultural sector. An inferential analytical approach was used based on estimating the autoregressive distributed lag model and demonstrating its suitability to the research data by testing statistical hypotheses related to the model. The data were analyzed and econometric models were estimated using econometrics and time series analysis software Eivews-12. The results of estimating the long-run relationship showed that all determinants have significant effects on agricultural investment except the inflation rate, the most influential of these determinants is the exchange rate, which negatively affects agricultural investment as the dollar exchange rate increases by one dinar, this leads to a decline in agricultural investment by (1.444854) million dinars. Then agricultural loans with a positive impact where an increase in the agricultural loans by one million dinars is offset by an increase in agricultural investment by (53,057) dinars. Followed by financial allocations for agricultural projects with a positive impact, where every increase in investment allocations by one million dinars will lead to an increase in agricultural investment by (422) dinars. And finally, the public budget deficit with a negative impact on agricultural investment, where every increase in the budget deficit by one million dinars will be offset by a decline in agricultural investment by (50) dinars. The joint integration test showed a long-run equilibrium relationship between economic and financial determinants and agricultural investment. The research recommends the need for the state to implement a package of policies and procedures to activate the role of variables affecting agricultural investment, which contribute to attracting local and foreign investments, most notably maintaining a stable exchange rate for the local currency and increasing the volume of agricultural loans provided.