Abstract—Based on the neoclassical growth model of Solow (1956), this study analyses the macroeconomic determinants of economic growth, examining the effect of public and private investment on economic growth in Iraq from 1970 to 2010.Cointegration and error correction models were applied to the time series data, followed by a Johansen cointegration test of trace and maximum eigenvalue statistics to establish long run equilibrium relationships among the variables in the model. This study also estimated an error correction model (ECM) and the significance of the coefficient on the error correction term confirms the long run relationship between the explanatory variables and economic development. The empirical results suggest that, in the long run, private investment, public investment, growth in the labour force and growth in oil revenues effect real gross domestic product (GDP) positively and statistically significantly; however, price and exchange rate volatility are found to have an adverse impact on real GDP. In light of these results, several policy recommendations are made to conclude. Index Terms—Economic development, Iraq, private and public investment, cointegration. I. INTRODUCTION Investment is a crucial for economic development, as it increases productivity, the employment and technological progress. In the last few decades, one of the important issues in macroeconomic and development economics was the impact of public and private investment on economic growth and has been the subject of renewed consideration in the academic literature. There is a general consensus that these two elements of investment have a differencing impact on economic growth and social conditions. Since the distinction between public and private investment matters for economic growth, it is essential to understand the linkages between these two components. Generally, academic research suggests that public investment in human capital and infrastructure services, such as transportation, communication, and sanitation, is complementary to private investment, through increasing its productivity, and thus having a significant positive impact on the economic growth [1]-[6]. However, some empirical literature [7]-[9] suggests that public investment may also ‗crowd out‘ private investment through over utilising scarce resources and reducing the aggregate amount of savings available for private investment; here, public investment is said to have an adverse effect on economic growth. In most developing economies, policymakers concerned with growth suggests that it is not only the aggregate level of the investment that matters for economic growth, but how to split between its public and private investments. This study contributes to the empirical literature on economic growth by analysing the determinants of economic growth in Iraq from 1970 -2010. The analysis in this paper is based on the neoclassical framework also adopted by [10]-[12], who attempt to empirically investigate how public and private investment affect economic growth. This is an important and unsettled policy issue, which warrants further this empirical work. Additionally, this study develops a simple analytical model which includes other theoretical determinants of growth, such as human capital and macroeconomic instability. Furthermore, it also assesses the differencing impacts of public and private investment on economic growth. The rest of this paper is organised as follows: section two provides a discussion of economic growth, public and private investment in Iraq; section three presents a review of the relevant empirical literature; and section four discusses the methodology, theoretical framework and model specification; the results of the empirical analysis and their implications are presented in the section five; section six concludes and suggests some policy recommendations. II. PUBLIC AND PRIVATE INVESTMENT PERFORMANCE IN IRAQ Before oil exploration Iraq‘s economy was based almost exclusively upon agriculture. However, after 1970 economic performance was relatively impressive, and nationalization of the oil industry in 1972 provided Iraq with a source of sustainable financial strength, leading the Iraqi government to adopt an expansionary fiscal policy that stimulated economic activity, motivate production cycle, and encourage consumption. Since then, the economy has experienced considerable structural change and the prospects for economic development have changed with it. Historically, the Iraqi economy experienced a high average of annual growth of approximately 8.3% between 1970 and1980, while the ratio of public and private investment to GDP were around 12.4% and 3.5% respectively. With regard to the Iraqi‘s economy, Foot argued that Iraqi oil resources in the 1970s allowed the country to reach the middle- income status, with a modern infrastructure, and good education and healthcare systems. By the beginning of the1980s, Iraq had the second largest economy in the Arab world, after Saudi Arabia, and the third largest economy in the Middle East. Having adopted a centrally planned economy dominated by the state [13]. Public and Private Investment and Economic Development in Iraq (1970-2010) Jwan Hussein and James Benhin International Journal of Social Science and Humanity, Vol. 5, No. 9, September 2015 743 DOI: 10.7763/IJSSH.2015.V5.550 Manuscript received May 10, 2014; revised July 10, 2014. The authors are with the Plymouth University School of Business and Management, UK(e-mail: jwan.hussein@postgrad.plymouth.ac.uk, james.benhin@plymouth.ac.uk).