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A Thorough Analysis of the Effects of Foreign Direct Investment on the Financial Account of the Iraqi Balance of Payments for the Period (2003-2015)
Journal of World Economic Research
Volume 6, Issue 3, June 2017, Pages: 34-45
Received: Mar. 8, 2017; Accepted: Mar. 30, 2017; Published: May 25, 2017
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Amna Al-Ameeri, Central Bank of Iraq, Baghdad, Iraq
Hanaa Al Samarai, Central Bank of Iraq, Baghdad, Iraq
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In order to analyze the direct and indirect effects of the foreign direct investment on the Iraqis balance of payments and financial account for the period (2003-2015), the study population and sample selected was the Balance of Payments Division at the Central Bank of Iraq through the follow-up of the entry of the data incoming from the relevant parties like banks and Iraq Stock Exchange in order to calculate the foreign direct investment through sorting and isolating the transactions that are classified under this part of the balance of payments and then registering the value of the transaction in the balance of payments as credit or debit transaction. The research methodology used a sample represented by the Balance of Payments Compilation Guide issued by the International Monetary Fund. A study was conducted to compare the fifth edition of the guide that was issued in 1993 and the sixth edition that was released in 2009. The study concluded that the outflows of foreign direct investment from Iraq were relatively weak as they did not exceed USD1,562.4, representing only 7.4% of total capital inflows to Iraq, which is also small relatively and its share of total foreign direct investment inflows to Arab countries ranged from 1.2% in 2007 to 10.7% in 2014. Hence, the effect of the flows of foreign direct investment both inside and outside Iraq on the financial account in particular and the balance of payment in general was weak. Even though the primary effect of the inflows might be positive, the effect was negative on all items of the financial account and balance of payment in general during the whole period. In other words, the obligations resulting from the inflows are bigger than their counterpart from the outflows. The study recommended adopting and setting some certain mechanisms to ensure the transmission of the effects of the international economy through the foreign direct investment into the domestic economy and the real sectors. Consequently, the financial account of the balance of payments is initially affected. In turn indirect impacts take place on the current account and service account through affecting the macro variables like the gross fixed capital formation that is considered a productive capacity that could be utilized to increase production and attain positive growth.
Iraqi Economy, Iraqi BOP, Foreign Direct Investments, Iraq
To cite this article
Amna Al-Ameeri, Hanaa Al Samarai, A Thorough Analysis of the Effects of Foreign Direct Investment on the Financial Account of the Iraqi Balance of Payments for the Period (2003-2015), Journal of World Economic Research. Vol. 6, No. 3, 2017, pp. 34-45. doi: 10.11648/j.jwer.20170603.12
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