Measuring and Analyzing the Reciprocal Relationship Between Dutch Disease and the Resource Curse in the Iraqi Economy (2004–2024)

This study addresses a profound structural dilemma in the Iraqi economy, characterized by an excessive reliance on crude oil exports, which has rendered the country vulnerable to the dual phenomena of the “Dutch Disease” and the “Resource Curse.” These conditions have adversely affected overall economic performance, contributing to the widespread prevalence of financial and administrative corruption and the loss of opportunity cost, driven by political instability and the absence of effective governance. The research aims to measure and analyze the bidirectional relationship between structural production imbalances (an indicator of Dutch Disease) and the Corruption Perceptions Index ( as a proxy for the Resource Curse)within the Iraqi economy over the period (2004–2024). To achieve this, the study employs a modern econometric methodology based on the Vector Error Correction Model (VECM), which facilitates the identification of the nature and magnitude of mutual influence between these two structural and institutional variables. The findings reveal that structural distortions in the Iraqi economy manifested in the dominance of the booming oil sector and the declining contributions of productive sectors such as agriculture and industry which are strongly correlated with elevated levels of corruption, by both reinforcing its institutional environment and weakening accountability mechanisms. Conversely, the study shows that corruption further exacerbates structural production imbalances by obstructing productive investment and incentivizing non-exchange-based activities, primarily within the service sector. This interplay creates a self-perpetuating cycle of economic and institutional dysfunction. The results confirm the research hypothesis regarding the existence of a reciprocal relationship between these two critical phenomena. The study concludes with a set of strategic structural and institutional reform proposals aimed at diversifying the economic base, enhancing transparency, and reinforcing governance frameworks to curb corruption and support sustainable economic revitalization in Iraq.