Measuring and analyzing the impact of exchange rate changes on inflation rates in Iraq for the period 2004-2022

Abstract

To achieve the research objective of measuring and analyzing the impact of both the exchange rate and the currency window on the inflation rate, the Autoregressive Distributed Lag (ARDL) model was used to estimate the relationship between the economic variables under study in the long run. The results of the standard analysis showed the existence of a long-term equilibrium relationship according to the Bounds–Test methodology between the exchange rate and inflation in the period studied. The study relied on the descriptive method and the inductive method to analyze the theoretical framework of the relationship between these variables, while the quantitative method was used to test the hypothesis regarding the case study (Iraq). The research concluded with a set of Conclusions and recommendations, the most important of which was the fluctuating stability of the exchange rate and the inflation rate in Iraq after the issuance of Law 56, which stipulates the independence of the Central Bank for the year 2004, and the Iraqi economy remaining largely centered around the oil sector during the research period. The most important recommendation of the study is that the vicious circle that the Iraqi economy suffers from must be broken due to the heavy dependence on oil revenues, and this requires effective coordination between the parties responsible for managing financial and monetary policies.