The Impact of Fixed Exchange Rate Policy on Inflation In The Iraqi Economy for the period (2004-2023)

• Post by: Muthanna mjdes
• فبراير 8, 2025
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Abstract

This study aims to verify a long-term correlation between Iraq’s official currency rate and inflation rate from 2004 to 2023, utilizing the ARDL bounds test approach for joint integration. This is carried out following an assessment of the series’ stability using authorized tests based on yearly data. Numerous findings from the study confirmed a link between the variables. The Econometric method demonstrated that the relationship between the independent variable (FEX), which stands for the fixed exchange rate, and the inflation rate variable (INF) validated the research hypothesis by presenting the results of the long-term estimation of the existence of a positive and significant relationship between the economic variables. This suggests that the fixed exchange rate regime enhances the impact of changes on the stability of Iraq’s inflation. The findings of the ARDL test showed that there was a long-term equilibrium link between the fixed exchange rate and inflation. The inflation rate (INF) will rise by 143 for every 1% increase in the currency rate (FEX) and vice versa, assuming all other factors affecting the model stay the same. As a result, the study suggests that in order to control inflation rates, the monetary authority must maintain stable exchange rates, choose the exchange rate accurately, and decide whether to alter the foreign exchange rate.

مجلة المثنى للعلوم الادارية والاقتصادية, 2025,المجلد 15, العدد 1, الصفحات 55-63

DOI:10.52113/6/2025-15-1/55-63