Financial liberalization and financial development in Iraq

This paper examines the impact of financial repression policies from 1970 to 2002, and the results of the financial liberalization polices between the years 2003-2007 on the financial development of Iraq. By using the Autoregressive Distributed Lag (ARDL) model, the paper argues that neither the financial repression policies nor the financial liberalization polices promoted the financial development of Iraq. This fact suggests that Iraq’s policy-makers have to launch multi-pronged measures, such as promoting private sector enterprises, reducing informal activities in the economy, stabilizing macroeconomic variables (reduction of fiscal deficit and inflation rate), and, most importantly, restore political and social security, in order to ensure the economic prosperity of the country.