Abstract

 The fiscal policy is considered one of the most emerged economic policies that used for creating public revenues from its conventional and unconventional resources from one hand, and as an instrument of public expenditure that lead to achieve the economic stability from other hand. After 2003, Iraq has followed inactive fiscal policies due to a full reliance on the oil revenues in financing the federal budgets. However, these budgets faces clear distortions through its poor organization for all its articles, which does not linked to the actual need for developing the economic sectors that create income and growth. In addition to using expanded fiscal policies that are not consistent with the monetary policies of the Iraqi central bank.                                                

Therefore, the fiscal policies in Iraq ought to be reconsidered via setting future studies for reconstructing the federal budget articles to insure achieving the social fairness and raise of level of economic growth. Hence, in order to illustrate the relationship between the fiscal policy – represented by public expenditure and economic growth – the study has used a time series spanned from 1990 to 2017, and the sample is examined by cointegration test and Granger causality approach. However, the result proved the presence of a unidirectional relationship from GDP to the public expenditure. This result was expected because of the high contribution of the oil sector to the GDP which amounted by 61.5% in 2017. This confirms that the oil sector contributes in raising level of economic growth and then its returns in foreign currencies support the federal public budget.