Analyzing and measuring the impact of Crowding Out in the Iraqi economy for the period (2004 - 2022)

Abstract

The research aims to clarify the role of the government sector in the Iraqi economy and the impact of this role on the private sector, as the government sector plays a decisive role in the development of the Iraqi economy, and increasing government spending by creating job opportunities, providing income for them, and purchasing the necessary materials for infrastructure projects, all This makes the public sector have a positive role in the Iraqi economy on the one hand, and on the other hand, the expansion of government spending in light of the security and health conditions, fluctuations in oil prices, and weak tax revenues may create great pressure on the state budget, and the effect of that pressure will be in creating a financial deficit in the budget. The public, and therefore it is difficult to finance this expansion in government spending, as the state may be forced to finance the deficit with internal and external public debt, which competes with the private sector for the funds available for lending through high interest rates. In measuring the impact of economic competition between the public sector and the private sector, the study relied on a methodology ARDR, as it found, although private investment tends to rise in absolute terms or as a percentage of GDP, this does not prevent public investment from crowding out the private sector, especially crowding out the funds available for borrowing to the private sector, when the government resorts to borrowing to finance the increase in spending. The relationship between public investments and private investments becomes complementary, meaning that public investments stimulate private investments in the long term.