The effect of fixed capital formation rate on gross domestic product in Iraq

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The total fixed capital formation is one of the main and influential determinants of production function through its impact on production costs, competitiveness, and profits. The Iraqi gross domestic product depends on one sector (the oil sector) in financing the government budget, which may lead to crises in case of oil price collapse. Therefore, the study aims to clarify the imbalance in the production function and the real output of the Iraqi economy and to indicate the role of the total fixed capital formation in this imbalance. The econometric methods were used to measure the degree of influence of the total fixed capital formation (independent variable) on the gross domestic product (dependent variable) from 2004 to 2020. The results showed a robust relationship between fixed capital formation and gross domestic product, where the independent variable affects the dependent variable by 4.5%, while the oil sector dominated the total value added by its acquisition of the total fixed capital formation by 47.45%, and the productive sectors of agriculture and industry achieved value added of 3.8%. The study concluded that the distribution of total capital formation by sector has an impact on the gross domestic product. Therefore, it is necessary to distribute the total fixed capital formation to the productive and production-supporting sectors to achieve economic growth and diversify the structure of the gross domestic product.

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    • Figure 1. Q-Stat statistics values for self-association and partial correlation of the residual
    • Figure 2. Stat statistics values for self-association and squared correlation of the residual
    • Figure 3. Normal distribution of the condom according to the Jarque-Bera test
    • Table 1. Development of gross domestic product at current prices in Iraq, and gross fixed capital formation for the period 2004–2020, one million Iraqi dinars
    • Table 2. Relationship between GDP and capital accumulation (K)
    • Table 3. The estimated regression of GDP and K
    • Table 4. Ramsy test
    • Table 5. Serial correlation LM test
    • Table 6. Heteroskedasticity test
    • Table 7. The average percentage of the contribution of the sectors in the gross domestic product for the period 2003–2020
    • Table 8. The development of the fixed capital formation structure according to the economic sectors, the average for the period 2004–2020
    • Table 9. The percentage of added value achieved in the economic sectors in Iraq for the period 2017–2020
    • Formal Analysis
      Sameer Siham Dawood, Mohammad Ghazi Nussaif Jasim
    • Funding acquisition
      Sameer Siham Dawood
    • Investigation
      Sameer Siham Dawood
    • Project administration
      Sameer Siham Dawood
    • Supervision
      Sameer Siham Dawood
    • Validation
      Sameer Siham Dawood
    • Visualization
      Sameer Siham Dawood, Mohammad Ghazi Nussaif Jasim
    • Writing – original draft
      Sameer Siham Dawood
    • Writing – review & editing
      Sameer Siham Dawood, Bilal Kadhim Haidar, Mohammad Ghazi Nussaif Jasim
    • Conceptualization
      Bilal Kadhim Haidar, Mohammad Ghazi Nussaif Jasim
    • Data curation
      Bilal Kadhim Haidar
    • Methodology
      Bilal Kadhim Haidar, Mohammad Ghazi Nussaif Jasim
    • Resources
      Bilal Kadhim Haidar, Mohammad Ghazi Nussaif Jasim
    • Software
      Bilal Kadhim Haidar