Analysis of the relationship between the exchange rate and inflation in Iraq For the term (2004 - 2020)

Abstract

              The research aims to stop at the concept of inflation and the exchange rate, analyze exchange rate changes and analyze the reality of the inflation index in Iraq, in addition to analyzing the relationship between the exchange rate and inflation in Iraq during the period (2004-2020).

The research also stems from the hypothesis that the exchange rate has an impact on inflation levels in Iraq.

The exchange rate is also a major linking tool between the local economy and international economies, and therefore the exchange rates leave an inevitable impact on the country’s economy, whether in its internal or external transactions. Therefore, the study of exchange rates and their impact on the variables of economic stability is a very important issue for an economy that seeks to achieve internal and external balance. As well as achieving stability in the local currency exchange rates and relative stability in inflation rates.

For this reason, the research was divided into two sections. The first topic dealt with the conceptual aspect of the exchange rate and inflation, while the second topic was about analyzing the impact of the exchange rate policy on the levels of inflation in Iraq.

The research reached a set of results, the most prominent of which was, that the relationship between the exchange rate and inflation is an inverse relationship, and this can be clarified through the government’s action to raise the exchange rate, i.e. reduce the value of the national currency against foreign currencies. Simple, but an inverse relationship between them.

The research came out with a set of recommendations, the most prominent of which was the need to draw up a clear policy by the Central Bank of Iraq to achieve permanent stability in the exchange rate and to ensure a positive impact on inflation levels and the economy as a whole.