ABSTRACT
This chapter examines the sensitivity of the Iraqi model when subjected to alternative policy shocks. It presents a number of simulations in order to determine the behavioural characteristics of the model as well as to see if the individual variables in the model behave properly under different perturbations. Multiplier analysis examines the path that the system follows, when it is subjected to an exogenous shock, and sees whether it corresponds to a priori information derived from economic theory. In the 1970s, export duties made a small contribution to total government revenues. The agriculture and manufacturing sectors in particular, were most severely hit by the increase in export duties, while output of the other production sectors was affected to a lesser extent. Since import prices were determined in the world market and with Iraq being a small economy, they were assumed to be unaffected by changes in Iraq’s export prices.
