The Impact of Some Macroeconomic Variables on the Asset Quality of Iraqi Commercial Banks

PhD; Salam Hashim Mohammed; Ameen Fahad Jayed

doi:10.56201/ijbfr.vol.12.no2.2026.pg

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The Impact of Some Macroeconomic Variables on the Asset Quality of Iraqi Commercial Banks

PhD, Salam Hashim Mohammed, Ameen Fahad Jayed

Abstract

The Iraqi banking sector suffers from various problems, particularly borrowers' defaults on their financial obligations, which has negatively impacted the quality of banking assets. This is due to numerous reasons and variables, particularly low per capita income, unemployment, inflation rates, economic growth, and other variables that affect asset quality. Therefore, the main problem of the study revolves around whether some macroeconomic variables have an impact on asset quality, and whether the Iraqi economy suffers from slow economic growth and high unemployment and inflation rates. The study relied on a descriptive, analytical, and quantitative approach using the ARDL model (autoregressive distributed lag model) and the 12Eviews program. The study aims to analyze the impact of economic growth, unemployment, and inflation rates on the asset quality of commercial banks in Iraq. The study concluded that economic growth has a negative impact on asset quality in the long run, achieving a negative value. Unemployment also has a negative impact on asset quality. The independent variables explain 73% of the dependent variable, while the remaining 27% is due to other variables not included in the model. This means that economic growth, inflation rates, and unemployment each affect 73% of asset quality. The study recommended adopting effective policies to address the productive activities of the gross domestic product , particularly the agricultural, industrial, and population sectors, as well as other sectors that achieve effective and real production. This should also reduce the overwhelming reliance on oil activity, which increases the income of individuals and companies and increases their ability to repay loans. This reduces non-performing loans, thus positively impacting asset quality. Commercial banks must exercise caution when granting loans to the private sector, particularly the trade, restaurant, and hotel sectors, and the manufacturing sector (15%). Therefore

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The Impact of Some Macroeconomic Variables on the Asset Quality of Iraqi Commercial Banks

Abstract

References

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