An Analysis of the Contribution of Macroeconomic Indicators to Stock Market Performance in Iraq

Abstract

This research aims to analyze the impact of several macroeconomic indicators on the performance of the Iraq Stock Exchange (ISX) by measuring the relationship between the ISX60 index and the inflation rate, the Iraqi dinar/US dollar exchange rate, the economic growth rate, and global oil prices. The research relied on quarterly data from the first quarter of 2010 to the fourth quarter of 2025, comprising 64 observations collected from official local and international sources. EViews 12 software was used for descriptive analysis, the extended Dickey-Fuller time series stationarity test, Pearson correlation analysis, multiple regression, Granger causality testing, and diagnostic model tests.

The stationarity test results showed that inflation was stationary at level (I(0)), while the ISX60 index, exchange rate, economic growth, and oil prices became stationary after the first difference (I(1)) was taken. The correlation matrix also revealed an inverse relationship between inflation and the market index, and positive relationships between the index and the exchange rate, economic growth, and oil prices. The model's coefficient of determination (CID) was 0.61, indicating that macroeconomic variables explain approximately 61% of the changes in the ISX60 index. Inflation had a statistically significant negative impact, while the exchange rate, economic growth, and oil prices showed significant positive effects. Economic growth recorded the largest positive CID in the model.

The Granger test demonstrated a unidirectional causal relationship between oil prices and economic growth and the market index, while no direct causal relationship was found between inflation and market performance. Diagnostic tests confirmed the absence of autocorrelation and heterogeneity of variance in the model, as well as the soundness of the residual distribution and the functional shape. The research recommends strengthening price and monetary stability, supporting diversified economic growth, expanding the base of listed companies, and improving the dissemination of economic and market data to enhance market efficiency and its ability to attract investment