Analysis of the impact of financial inclusion on the Iraqi dinar exchange rate for the period 2012-2023

Abstract

This study analyzed the impact of financial inclusion on the Iraqi dinar exchange rate for the period (2012–2023), using the ARDL model. The study relied on two main indicators of financial inclusion: the access indicator, which includes banking density, ATMs, and geographical distribution, and the usage indicator, which includes banking depth for loans and deposits, and bank account ratios. The results showed that access to financial services negatively impacts the exchange rate in the short term, as the expansion of bank branches and ATMs enhances confidence in the Iraqi dinar, which limits inflationary pressures. The usage indicator has a strong inverse relationship with the exchange rate in the long term, reducing dependence on the dollar and enhancing domestic liquidity. Structural factors, such as external shocks and weak infrastructure, reduce the effectiveness of financial inclusion in stabilizing the exchange rate, especially outside of large cities.