Using Cointegration to Estimate the Impact of Public Expenditure on Private Consumption Expenditure in Iraq for The Period (1980-2008)


The importance of public expenditure appears as a tool of financial policy related the public economic policy, which among its goals is to achieve economic stability that this variable plays a role in stabilizing the level of private consumption, which is considered the largest component of national income. There should be an emphasis on this role to achieve the desired objectives. The time series for variable of this study was submitted before appreciation to Augmented Dickey- fuller (ADF) Test to know of the stability of the time series and after ensuring the stability of the chain. It was estimated the decline of spending both of public consumer expenditure and public investment expenditure on private consumer expenditure by the mean of the least squares (OLS) that obtained the function of the long term and then the Cointegration test using Johansen test. Which was confirmed through the presence of Cointegration between the variables under study that means there is an equilibratory relationship of long-term between private consumer spending and both in public investment and public consumer spending. After that a test of causality was done by using Granger Causality which confirmed its results that there is reciprocal causal relationship between the components of public spending and private consumption expenditure.