Analysis of the relationship between public debt and inflation in Iraq

Abstract

Iraq is one of the oil-producing countries that depend on the oil resource to finance the budget and the economy. Oil revenues constitute large proportions of total public revenues, often reaching more than (90%). However, the fluctuations in oil prices, the wars waged by the previous regime, and the increase in public spending, were reflected in the increase in public debt rates since the eighties of the last century. The accumulated debt has had direct and indirect effects on most economic variables, including inflation rates, given the close relationship between public debt rates and inflation in most countries of the world, especially the developing ones. The relationship between public debt and inflation in Iraq during the period (2004-2020) was tested using the ARDL model. The results showed the weak impact of public debt, both internal and external, on inflation rates in Iraq during the study period, which indicates the limited impact of public debt on inflation and the linkage of the latter with variables other than public debt in terms of exchange. rates, given that Iraq is highly dependent on imports. To meet the domestic demand for various types of goods and services