The Impact of Foreign Direct Investment on Gross Domestic Product in Iraq During the Period (2006 - 2015)


  • Shivan H. Ali College of Administration & Economics, University of Duhok, Kurdistan-region, Iraq
  • Shivan A. Jameel College of Administration & Economics, University of Duhok, Kurdistan-region, Iraq



The paper aims at examining the impact of Foreign Direct Investment on Gross Domestic Product in Iraq over the period 2006-2015. Data have been collected from the World Bank database. For the purpose of analyzing data, the study applied Foreign Direct Investment (FDI) Net Inflows as an independent variable while Gross Domestic Product (GDP) as a proxy for economic growth as a dependent variable. The results of the study found that all of the variables under study are non-stationary at the level while stationary at first differenced by utilizing unit-root tests (ADF). The findings of Johansen Test for Co-integration showed that there is no long-term relationship among variables. Other findings of the paper revealed that, in short term, it is concluded that FDI Granger-Causes GDP and there is a short-run causality running from FDI to GDP. The research recommended that Iraq has to pay more attention to improve the level of education sectors and financial sector and to empower human capital. It also has to decrease lending rate, transportation and instability terms of political and economic environment as well as to improve liberalized market environment.


Download data is not yet available.


1. Abdul Khaliq & Ilan Noy, (2007). Foreign Direct Investment and Economic Growth: Empirical Evidence from Sectoral Data in Indonesia. Working Papers 200726, University of Hawaii at Manoa, Department of Economics.
2. Abu – Eideh, O. M. (2014). Impact of Foreign Direct Investment on Economic Growth in Palestine: An Econometric Study of the Period (1994-2013). European Journal of Business and Management. 6(21), pp. 61– 88.
3. Acaravci, A., & Ozturk, I. (2012). Foreign direct investment, export and economic growth: Empirical evidence from new EU countries. Romanian Journal of Economic Forecasting, 2, pp. 52–67.
4. Aga, A. A. Kh. (2014). The Impact of Foreign Direct Investment on Economic Growth: A Case Study of Turkey 1980–2012. International Journal of Economics and Finance. 6(7), pp. 71-84.
5. Agrawal, G., & Khan, M. A. (2011). Impact of FDI on GDP: A Comparative Study of China and India. International Journal of Business and Management, 6(10), pp. 71-79.
6. Ahmed, T., & Malik, S. U. (2012). Determinants of inflow of foreign direct investment (FDI) into Pakistan. NICE Research Journal, 5, pp. 93-110. Online available at:
7. Alfaro, L., Chanda, A., Kalemli-Ozcan, S., & Sayek, S. (2004). FDI and Economic Growth: The Role of Local Financial Markets. Journal of International Economics, 64(1), pp.89-112.
8. Andraz, J., & Rodrigues, P. (2010). What causes economic growth in Portugal: exports or inward FDI? Journal of Economic Studies, 37(3), pp. 267-287.
9. Arısoy, İ. (2012). The impact of foreign direct investment on total factor productivity and economic growth in Turkey. The Journal of Developing Areas, 46(1), pp. 17–29.
10. Asaad, Z. (2014). The Economic Determinants of Foreign Direct Investment Inward ‎to Iraq for Period (2004-2011). Journal of the University of Duhok, 17(1), pp. 192-217.‎
11. Audi, M. (2011). Is foreign direct investment a cure for economic growth in developing countries? Structural model estimation applied to the case of the south shore Mediterranean countries, Journal of International Business and Economics, 11(4), pp. 32–51.
12. Baharumshah, A. Z., & Almasaied, S. W. (2009). Foreign direct investment and economic growth in Malaysia: interactions with human capital and financial deepening. Emerging Markets Finance and Trade, 45(1), 90102.
13. Baig, M. M., Kiran, S., & Bilal, M. (2016). Relationship between FDI and GDP: A Case Study of South Asian Countries. Journal of Business and Financial Affairs. 5(3), pp. 1-4
14. Balamurali, N., & Bogahawatte, C. (2004). Foreign Direct Investment and Economic Growth in Sri Lanka. Sri Lankan Journal of Agricultural Economics, 6(1), pp. 37–50.
15. Balasubramanyam, V., Salisu, M., & Sapsford, D. (1996). FDI and Growth in EP and IS Countries. The Economic Journal. 106(434), pp. 92-105. Online Available at:
16. Bende-Nabebde, A., Ford, J., & Slater, J. (2001). FDI, Regional Economic Integration and Endogenous Growth: Some evidence from Southeast Asia. Pacific Economic Review. 6(3), pp. 383-399.
17. Bengoa, M., & Sanchez-Robles, B. (2003). FDI, economic freedom and growth: new evidence from Latin America. European Journal of Political Economy, 19(3), pp. 529–545,
18. Borensztein, E., De Gregorio, J., & Lee, J. W. (1998). How does foreign direct investment affect economic growth? Journal of International Economics. 45(1), pp. 115-135. Online available at:
19. Brahim, M., & Rachdi, H. (2014). Foreign Direct Investment, Institutions and Economic Growth: Evidence from MENA Region. Journal of Reviews on Global Economics, 3, pp. 328-339.
20. Brooks, C. (2014). Introductory Econometrics for Finance. 3rd ed. United Kingdom: Cambridge University Press. Available online at:
21. Carkovic, M., & Levine, R. (2005). Does Foreign Direct Investment Accelerate Economic Growth? Onlie available at:
22. Carlos, E. F., & Eddie, V. Z. (2015). Foreign direct investment and gross domestic product growth. International Conference on Applied Economics, ICOAE 2015, 2-4 July 2015, Kazan, Russia. Procedia Economics and Finance, 24 (2015), pp.198 – 207. Online available at:
23. Carson, C. S. (2003). International Monetary Fund: Foreign Direct Investment Trends and Investment. Online available at:
24. Chee, Y. L., & Nair, M. (2010). The Impact of FDI and Financial Sector Development on Economic Growth: Empirical Evidence from Asia and Oceania. International Journal of Economics and Finance, 2(2), pp. 107-119
25. Cheema, S. A. (2013). Investing in Iraq: Prospects and Challenges. Centre for West Asian Studies. Jamia Millia Islamia - New Delhi India, Middle East Institute. Online available at:
26. Chen, C., Chang, L., & Zhang, Y. (1995). The Role of Foreign Direct Investment in China’s Post 1978 Economic Development. World Development 23(4), pp. 691-703. Online available at:
27. Choe, J. I. (2003). Do Foreign Direct Investment and Gross Domestic promote Economic Growth? Review of Development Economics, 7(1), pp. 44-57.
28. Fitzová, H., & Žídek, L. (2015). Impact of Trade on Economic Growth in the Czech and Slovak Republics. Economics & Sociology, 8(2), pp. 36–50, doi: 10.14254/2071-789x.2015/8-2/4
29. Gujarati, D. N. & Porter, D. C. (2008). Basic Econometrics. 5th ed. New York: McGraw-Hill/Irwin.
30. Gupta, P., & Singh, A. (2016). Causal nexus between foreign direct investment and economic growth: A study of BRICS nations using VECM and Granger causality test. Journal of Advances in Management Research, 13(2), pp. 179–202.
31. Investopedia Dictionary, online available at:
32. Iordanova, T. (2015). Introduction to Stationary and Non-Stationary Processes. Available online at: Date of access: 17 September. 2019.
33. Jude, C., & levieuge, G. (2014). Growth Effect of FDI in Developing Economies: the Role of Institutional Quality. Laboratoire d'Economie d'Orléans, 40(4), pp. 1-31.
34. Jun, S. (2015). The Nexus between FDI and Growth in the SAARC Member Countries, Journal of East Asian Economic Integration, 19(1), pp. 39-70.
35. Lahiri, S. & Ono, Y. (1998). Foreign Direct Investment, Local Content Requirement and Profit Taxation. Economic Journal, 108(447), pp. 444-457. Online available at:
36. Li, X., & Liu, X. (2005). Foreign direct investment and economic growth: an increasingly endogenous relationship, World Development, 93(3), pp. 393–407, doi: 10.1016/j.worlddev.2004.11.001.
37. Lloyds bank, (2019). Foreign Direct Investment in Iraq. Online available at:
38. Marwah, K., & Tavakoli, A. (2004). The Effects of Foreign Capital and Imports on Economic Growth: further evidence from four Asian countries (1970-1998). Journal of Asian Economics, 15(2), pp. 399-413.
39. Nicet-Chenaf, D., & Rougier, E. (2009). FDI and growth: A new look at a still puzzling issue, Groupe de Recherche en Economie Théorique et Appliquée, Vol. 5113, No. 2009–13, pp. 1–26.
40. Ozturk, I., & Kalyoncu, H. (2007). Foreign direct investment and growth: An empirical investigation based on cross-country comparison. Munich Personal RePEc Archive. Paper No. 9636, 60(1), pp. 75-82. Online available at:
41. Reza, S. M., Fan, H., Reza, T., & Wang, B. (2018). The impact of foreign direct investment inflows on economic growth: evidence from Bangladesh. Journal of Business and Retail Management Research (JBRMR), 12(2), pp. 212-223. DOI: 10.24052/JBRMR/V12IS02/TIOFDIIOEGEFB
42. Seyoum, M., Wu, R., & Lin, J. (2015). Foreign Direct Investment and Economic Growth: The Case of Developing African Economies. Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement. 122 (1), pp.45–64.
43. Simionescu, M. (2016). The relation between economic growth and foreign direct investment during the economic crisis in the European Union. Journal of Economics and Business. 34(1), pp. 187-213. Online available at:
44. Studenmund, A. H. (2006). Using Econometrics: A Practical Guide (5th ed.). Dary Fox.
45. Su, Y., & Liu, Z. (2016). The impact of foreign direct investment and human capital on economic growth: Evidence from Chinese Cities, China Economic Review, 37 (2016), pp. 97–109.
46. Trojette, I. (2016). The Effect of Foreign Direct Invest on Economic Growth: The Institutional Threshold. Région et Développement, 43, pp. 111-138.
47. Umoh, O. J., Jacob, A. O., & Chuku, C. A. (2012). Foreign Direct Investment and Economic Growth in Nigeria: An Analysis of the Endogenous Effects. Current Research Journal of Economic Theory, 4(3), pp. 53–66.
48. UNCTAD (2018) World Investment Report, Investment and New Industrial Policies. Country Fact Sheet: Iraq. Online available at:
49. Urata, S. (1998). Japanese foreign direct investment in Asia: Its impact on export expansion and technology acquisition of the host economies. Waseda University and Japan Center for Economic research. National Library of Australia.
50. Wang, J., & Blomström, M. (1992). Foreign Direct Investment and Technology Transfer: A Simple Model. European Economic Review. 36(1), pp. 137-155.
52. Wing, J. (2013). 2011 Sees Another Large Increase In Foreign Investment In Iraq. AK News, available at
53. Zhang, K. H. (2001). Does foreign direct investment promote economic growth? Evidence from East Asia and Latin America. Contemporary Economic Policy, 19(2), 175–185. Online available at:



How to Cite

Ali, S. H., & Jameel, S. A. (2021). The Impact of Foreign Direct Investment on Gross Domestic Product in Iraq During the Period (2006 - 2015). Academic Journal of Nawroz University, 10(1), 382–397.