Foreign reserves and their impact on achieving exchange rate stability in the Iraqi economy for the period (2004-2023)

Abstract

    The research aims to measure the impact of foreign exchange reserves on the stability of the exchange rate in the Iraqi economy and to clarify the relationship between them, during the period 2004 - 2023 and in order to verify the research hypothesis and using standard methods, where standard models were built according to annual data. The research found a long-term relationship (co-integration) between the independent and dependent variables, according to the joint integration model (ARDL), and using the standard method, it became clear that the relationship between the independent variable FER, which expresses foreign exchange reserves, and the exchange rate variable ER is a direct relationship, i.e. if foreign reserves increase by (1%), the ER variable increases by (.0036951) of that percentage and the opposite occurs in the case of a decrease, assuming that other factors affecting the model are constant. Based on these results, the study recommends that the monetary authority should re-manage and direct foreign reserves in a way that ensures the development of appropriate exchange rate policies and systems that enable the building of the economy, because reserves provide a buffer in times of economic crises, especially for developing countries such as Iraq.