The Impact of Political Stability and Institutional Arrangements of Monetary Policy on Investment in Iraq

Document Type : Original Article

Authors

1 Department of Economics, Faculty of Administrative Sciences and Economics, Arak University, Arak, Iran. (Corresponding author).

2 M.A Student in Economics, Faculty of Administrative Sciences and Economics, Arak University, Arak, Iran.

10.22126/mps.2026.13247.1125

Abstract

In the two decades since 2003, the Iraqi economy has faced political instability, internal insecurity, and severe institutional fluctuations that have significantly affected the investment Environment in the country. This study simultaneously examines the factors influencing investment from an institutional perspective, focusing on the impact of political stability, measured by the “Political Stability and Absence of Violence / Terrorism” index and monetary policy institutional arrangements, measured by the "Central Bank Independence" index, on investment in Iraq. Annual data for the period 2003–2023 were used to estimate the coefficients by an Autoregressive Distributed Lags (ARDL) model. The results indicate that improvements in political stability and reductions in violence have a positive and statistically significant effect on investment in both the short and long run. Furthermore, greater central bank independence strengthens investment over the long run, as reduced governor turnover is associated with increased monetary policy predictability. Exports and inflation exhibit positive and significant long-run relationships with investment, whereas economic growth shows no significant relationship with investment in either the short or long run. The findings highlight the decisive role of internal security, institutional stability, and monetary governance quality in shaping Iraq's investment environment.

Keywords

References

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Mesopotamian Political Studies
Volume 5, Issue 2 - Serial Number 15
September 2026
Pages 227-258

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History

  • Receive Date: 26 November 2025
  • Revise Date: 09 August 2026
  • Accept Date: 31 August 2026

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