A STANDARD ANALYSIS OF THE RELATIONSHIP BETWEEN MONETARY VARIABLES AND INFLATION IN IRAQ: A MODEL FOR THE PERIOD 2004-2021
The aim of this study is to look at how well monetary policy variables have been used in Iraq and how they affect the process of deflation using standard analysis methods. The study aims to achieve its goal by focusing on the specific period of 2004–2021 as a basis. The ARDL model estimates the short-term relationship and finds the limits of cointegration for periods of slowdown that are automatically spread between the monetary policy variables (exchange rate, broad money supply, and inflation rate). The next step involves attempting to estimate the long-term relationship through its long-term parameters. The study concluded that exchange rate control is used by monetary authorities to maintain acceptable inflation rates and attain monetary stability. The analysis also demonstrates that the independent factors and the dependent variable (inflation) have a cointegration relationship (broad money supply, exchange rate), a decline in the actual value of the exchange rate (an increase in the exchange rate of the Iraqi dinar against the dollar by one unit) lowers purchasing power. Additionally, there is a long-term relationship between (the exchange rate and the inflation rate) at the 5% level. Price increases result in an increase in the inflation rate of 0.11%. To ensure monetary stability in Iraq, one of the most crucial proposals was to increase the exchange rate for the Iraqi dinar. Additionally, make an effort to pursue a monetary strategy that can expand and move economic activity in tandem with other economic measures.
monetary policy, exchange rate, broad money supply, inflation.