The impact of spending policy shocks on the Iraqi trade balance for the period (2004-2021)

Economic shocks directly affect financial variables in the Iraqi economy, and this is due to the presence of a strong connection between the general budget and the trade balance according to Keynesian theory. So financial policy responds through its spending and revenue tools in a way that is consistent with or contrary to the direction of the economic shock, and that response is reflected in the trade balance in a way unexpected changes can be expressed in spending policy shocks. The research aims to demonstrate the impact of spending shocks on the trade balance in the Iraqi economy. Iraqi exports depend to a large extent on crude oil exports, and they are directly affected by international oil prices. Based on the results of the cointegration test and the vector autoregressive (VAR) model for the model of spending policy and its impact on the trade balance. It was inferred that there is a long-term equilibrium relationship between the variables of the model, and the stimulated response function of the model indicates that an increase in public spending leads to an increase in the trade balance deficit, and in order Achieving stability in spending activity. It is necessary to find more stable alternative sources of revenue to finance the general budget to ensure the stability of economic activity. The research recommended changing the course of public expenditures by changing the structure of the general budget in favor of investment spending directed to expanding production capacities and focal structures to ensure the availability of commodity and service products, and restructuring consumer spending to ensure rationalization and optimal allocation. In addition to the importance of reducing unproductive employment policies and other not sober spending policies..