Assessing the Impact of Macroeconomic Factors on Economic Growth in the Kurdish Regions

Abstract

This study aims to examine the influence of key macroeconomic factors, including consumption, investment, government expenditures, and net exports, on economic growth within the Kurdish regions. Using balanced panel data spanning 1980 –2020, this study investigates the cointegration relationship between these variables using the PMG-ARDL cointegration method and employs the Dumitrescu and Hurlin causality test to unveil causal linkages among the variables. The PMG analysis uncovers a long-term positive relationship between consumption, investment, and net exports on economic growth, while government expenditure exhibits a negative long-term association with economic growth. In the short-run, PMG results reveal a positive connection between investment and government expenditures on economic growth. The Dumitrescu and Hurlin heterogeneous causality test reveals causal relationships running from economic growth to consumption and investment, as well as from consumption and net exports to government expenditures. Bidirectional causality is observed between investment and government expenditures, investment and consumption, and net exports and economic growth. These findings hold substantial policy implications for how fiscal strategies should be reviewed to stimulate economic growth and align them with SDGs for targeted investments.