Analysis of The Reality of Sustainable Finance in Iraq for The Period (2009 – 2023)
DOI:
https://doi.org/10.14419/fanjjb54Keywords:
Early Warning System (EWS); Banking Crises; Scenario Analysis; Iraqi Economy; Liquidity; Oil ShocksAbstract
This study aims to construct an Early Warning System (EWS) to predict banking crises in Iraq, serving as a case study for rentier economies that suffer from public sector dominance and excessive reliance on oil.
The study utilized annual data for the period (2010-2023) with projections up to (2029), employing "Scenario Analysis" methodology and Unit Root Tests (ADF). Micro-prudential indicators (such as Capital Adequacy, Liquidity, and Non-Performing Loans) were integrated with governing macro-variables (Oil Prices, GDP, and Exchange Rates).
The results indicated that "Liquidity Risk" constitutes the greatest systemic threat to the Iraqi banking sector, where crisis occurrence is directly linked to oil shocks and the withdrawal of government deposits. Conversely, "Credit Risk" demonstrated a limited impact due to the small size of the private sector credit portfolio.
The study recommends the necessity of diversifying banking funding sources to decouple the link between the general budget and banking liquidity.
References
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