COMPARATIVE ANALYSIS OF BANK-BASED AND MARKET-BASED FINANCIAL SYSTEMS ON GDP GROWTH: EVIDENCE FROM IRAQ

Abstract

This study examines the effects of bank-centered and market-centeredfiscal systems on Iraq’s GDP growth through 1990 to 2023. The objective is to comparatively analyze the short- and long-lasting effects of these systems on economic growth using ARDL model. Data are sourced from financial indicators of Iraqi banks and the Iraq Stock Exchange (ISX). Findings reveal that the banking sector is of a positive but short-term effect on economic growth, whereas the capital market shows a more consistent contribution in both the short and long term. These results highlight institutional and regulatory challenges in the banking sector and the growing role of capital markets in Iraq’s economy. To support sustainable economic growth, policymakers should enhance banking sector performance and promote capital market improvement. This paperhelps in understanding the role of financial systems in enhancing economies and offers directions for future research.