Measuring and Analyzing the Impact of Exchange Rate, Inflation, and Political Stability on Iraq's Trade Exposure during the Period (2004-2023)

Abstract

Iraq is among the countries significantly affected by fluctuations in various economic factors, particularly in relation to exchange rate, inflation, and political stability. Trade Exposure, which reflects the volume of trade exchange with the external world, is considered one of the key indicators that demonstrate the national economy’s ability to interact with global markets. This research aims to measure the extent of the impact of the exchange rate, inflation, and political stability on trade Exposure in Iraq. The central research problem lies in the following main question: To what extent do the exchange rate, inflation rate, and political stability influence trade Exposure in Iraq during the period (2004–2023)? The study is based on the primary hypothesis that there is a statistically significant relationship between exchange rate, inflation, and political stability and trade Exposure in Iraq during the study period. It is expected that there is an inverse relationship between both the exchange rate and inflation and trade Exposure, while a positive relationship is anticipated between political stability and trade Exposure. The quantitative econometric approach was adopted through the application of econometric models such as the Autoregressive Distributed Lag (ARDL) model, which is used to estimate the dynamic relationships among variables. The study reached several conclusions, including that the co-integration test (Bound Test) indicates the existence of a long-run equilibrium relationship among all the study variables. Among the most important recommendations is to enhance political and institutional stability by strengthening state institutions and reinforcing the rule of law.