Measuring and analyzing the impact of some economic indicators on the inflation rate in Iraq for the period (2004-2023)

Abstract

The study of inflation in Iraq holds significant importance due to its direct impact on economic stability and living standards. Since 2004, Iraq has faced multiple economic challenges resulting from political and security conditions, heavy reliance on oil, and fluctuations in the exchange rate of the Iraqi dinar. These factors have contributed to volatile inflation rates, which in turn have affected individuals’ living conditions and caused economic activity fluctuations. This research aims to measure and analyze the effect of several macroeconomic indicators-namely, financial depth, trade openness, nominal exchange rate, and the annual change rate of oil revenues—on the inflation rate in Iraq during the period (2004-2023). The study employs an analytical econometric approach using the Autoregressive Distributed Lag (ARDL) model. Key findings include a positive and significant relationship between financial depth and the annual change in oil revenues with inflation, while trade openness and the nominal exchange rate showed a negative and significant relationship with inflation. Among the main policy recommendations are controlling the money supply and liquidity in line with actual economic growth to avoid inflationary pressures caused by increased aggregate demand, and promoting investment in export-oriented industries by supporting local industries capable of competing internationally, thereby reducing the trade deficit and providing local alternatives to imported goods.