Measuring and Analyzing the Impact of Monetary Policy Instruments on Inflation Rates in Iraq for the Period (2003–2023)

Abstract

Since 2003, the Iraqi economy has undergone significant transformations due to political, security, and economic changes. Inflation has emerged as one of the major economic challenges facing the country. Monetary policy plays a crucial role among macroeconomic policies, directly influencing economic activity by contributing to price stability and maintaining the purchasing power of the local currency. This study aims to examine the extent to which monetary policy instruments have affected inflation control during the period from 2003 to 2023, a phase marked by sharp economic fluctuations driven by both internal and external factors. The research employs a deductive approach to assess the impact of monetary policy tools in curbing inflation, alongside an inductive method to analyze inflation trends over time. The study reached several key findings, most notably that the Central Bank of Iraq’s purchases of foreign currency have had the most significant long-term effect in containing inflation. The study recommends that Iraq must reduce its reliance on oil revenues by diversifying its sources of income through the development of other sectors such as industry, agriculture, and tourism, in order to shield the economy from the volatility of oil prices.