What are the Determinants of Investment in the Iraqi Agricultural Sector?

Abstract

The agricultural sector is one of the main economic activities that contribute to a country’s national economy. However, this sector’s growth in Iraq is facing difficulties considering the decline of agricultural capital stock and its reliance on government investment, which is insufficient. Therefore, it requires activating investment in the agricultural sector. Agricultural investment is affected by many determinants that prevent its development. This study aims to investigate the determinants of investment in Iraq such as the rate of inflation, corruption, and agricultural gross domestic production (GDP) for the period 2004Q1-2019Q4. The Autoregressive Distributed Lag Model (ARDL) is used to investigate the study parameters. The results indicated a significant impact of corruption, inflation, and agricultural GDP on Iraq’s agricultural investment in the long run. A 1% decrease in the inflation rate leads to an increase in agricultural investment by 50%. An increase in agricultural GDP by 1% leads to increased agricultural sector investment by 59%. 20% of the defect in the previous year for agricultural investment was corrected in the current year.The results also indicated a long-term equilibrium relationship between investment in the agricultural sector, inflation, corruption, and agricultural GDP, which differed in their impact between the short and long terms. Therefore, decision-makers in Iraq must draw a clear future vision and set appropriate laws to attract investment in the agricultural sector for its development. The country needs financial and economic policies that achieve low and stable inflation rates and limit the adverse effects of inflationary pressures in the short and long term and combat the country’s rampant corruption.