The impact of exchange rate and crude oil prices on the economic Exposure of Iraq

Abstract

Foreign trade is one of the most important manifestations of international economic relations in developing economies, including Iraq, as a result of the nature of its rentier economy, which relies on oil export revenues to a very large extent and is almost the only one, as oil revenues represent the main source for financing Iraq's needs of hard currency in light of the weak interest in other sources of resources. Natural, industrial and agricultural are of little importance, and at the same time their imports vary excessively, especially after the US occupation of Iraq in 2003. Foreign trade often contributes to creating unequal exchange relations with foreign countries, which greatly reflects the degree of economic exposure to the Iraqi economy and leads to raising the level of Its foreign economic dependence as well as on the nature of the Iraqi trade balance.

This research aims to identify the effects of changes in crude oil prices and the exchange rates of the Iraqi dinar on the degree of economic exposure and the trade balance and analyze the short-term and long-term relationship between them in order to define economic policies and programs that contribute to improving the degree of economic exposure in Iraq. Indicators of economic exposure and the balance have been calculated and measured. Commercial and analysis of the cointegration relationship between these four variables within the Johansen and Ardel method of cointegration.