Impact of Financial Liberalization on Financial Depth in Iraq

This paper examines the Mackinnon-Show hypothesis i.e. financial liberalizationpromotes financial depth in case of Iraq. Iraq launched a comprehensive program of economicand financial liberalization since 2003. Thus, this paper aims to answer the key question that“is financial liberalization stimulated the financial depth in Iraq?”. By applying the ARDLAutoregressive Distributed Lag model on quarterly data during the period 2005- 2010, thepaper finds that the liberalization of interest rates as a proxy of financial liberalizationstimulated the financial depth only in the long-run in the case of Iraq.