Measuring and Analyzing the Impact of Economic Exposure Indicators on the Inflation Rate in Selected Middle Eastern Countries for the Period 2004-2023

Abstract

This study aims to measure and analyze the impact of the economic openness index on the inflation rate in selected Middle Eastern countries) Iraq, Iran, Turkey, and Saudi Arabia (during the period 2004-2023, using panel data methodology and the Fully Modified Ordinary Least Squares (FMOLS) model. The purpose is to determine the nature of the long-run relationship between the examined variables. The findings reveal a positive and statistically significant relationship between economic openness and inflation at the 1% significance level, indicating that a higher degree of economic openness leads to a noticeable increase in inflation rates. This outcome is primarily attributed to the heavy dependence of most Middle Eastern economies on essential imports, particularly food commodities, as well as their vulnerability to exchange rate fluctuations and chronic economic deficits. The study recommends diversifying the economic base and strengthening domestic production to reduce dependence on imports. Moreover, it emphasizes the need to coordinate trade policies with monetary and fiscal policies to achieve sustainable price stability in the long run.