THE IMPACT OF SOME MONETARY AND FINANCIAL VARIABLES ON THE BALANCE OF PAYMENTS A QUANTITATIVE STUDY FOR THE PERIOD 2004-2021 USING IRAQ AS A MODEL
The study aims to understand the level of development of certain variables in the monetary and fiscal policies in Iraq, and to identify their impact on the balance of payments. This is achieved by using both the descriptive-analytical method and the quantitative method. To achieve the objective of the study, a specific time frame from 2004 to 2021 was relied upon. Through the use of the ARDL model, the short-term relationship was estimated and the bounds of co-integration were measured using the bounds test. This methodology was applied automatically between monetary and financial variables, including exchange rate, broad money supply, public expenditures, and public revenues, as well as the balance of payments. Subsequently, the study estimated the long-term relationship through its parameters in the long run. The study concluded the necessity of adopting more monetary and fiscal reforms that suit the current situation of the Iraqi economy. The study also found a cointegration relationship between the dependent variable (balance of payments) and the independent variables (broad money supply, exchange rate, public revenues, and public expenditures). Test results inferred that both monetary variables (money supply and exchange rate) have a positive impact on the balance of payments. In contrast, regarding the fiscal variables (public revenues and public expenditures), the public revenue variable had a positive effect on Iraq's balance of payments, while public expenditures had a negative impact, indicating they do not influence the balance of payments in the short and long term. The most crucial recommendation was the need for coordination between the Central Bank and the Ministry of Finance in defining monetary objectives, with the Central Bank taking on the responsibility of formulating and selecting the appropriate tools to implement this policy.
Exchange Rate, Broad Money Supply, Public Expenditures, Public Revenues, Balance of Payments.