Analysis of the Mechanisms of Transmission of the Impact of Government Consumption Spending on the Current Account Balance in Iraq for the Period (1990-2014) P.

Abstract

Public spending, especially consumption spending, is one of the most important levers of the fiscal policy through which it works to achieve economic balance. However, this spending may be one of the main reasons for the deterioration of the external balance represented by the status of the current account balance, and the relationship between government spending and the current account balance has gained attention of many researchers, by studying the impact of government spending, in both consumer and investment parts, on the current account balance, and in this paper the impact of government consumption spending in setting up the current account will be studied through three basic mechanisms, which are the transmission mechanism within the framework of Keynesian thought, the transmission mechanism according to monetary thinking and the transmission mechanism according to the double deficit hypothesis. As studying the impact of government consumption spending on the current account balance is of utmost importance to find out the causes of the imbalance in the current account balance and to give appropriate solutions to address this imbalance, as most developing countries seek to correct the imbalance in the balance of their payments without looking at the reasons that led to this disruption.