The Monetary Policy Strategy of the Central Bank of Iraq: Between Monetary Theory and Practice

Abstract

This research aims to analyze the theoretical debate on monetary policy management strategies and the interrelationship between this theoretical debate and the reality of how central banks adopt strategies. It addresses the most prominent strategies used and the economic conditions that compel central banks to transition from one strategy to another. Several conclusions were reached, the most important of which is that central banks have tended toward adopting an inflation targeting strategy at a 2% inflation rate. This is what the Federal Reserve in the United States and the European Central Bank have adopted. The research also presents some recommendations, the most important of which is that if any central bank moves to an inflation targeting strategy, it needs to have a deep financial system so that interest rates can play their role in influencing economic activity through the interest rate channel.