The phenomenon of dollarization in Iraq and its impact on the effectiveness of monetary policy for the period (2005-2025)

Abstract

This research aims to analyze the phenomenon of dollarization in Iraq for the period (2005-2025) and measure its impact on the effectiveness of monetary policy. The research was based on descriptive and standard methods, using the multiple linear regression model and the self-regression vector model (VAR), based on the data of the Central Bank of Iraq. The descriptive results showed that the dollarization rate reached (123.32%) in 2025, exceeding the 100% barrier as of 2023, indicating the transformation of the economy towards almost complete dollarization, while the standard analysis revealed that the dollarization coefficient was statistically insignificant, which means there is no confirmed effect of dollarization on inflation, while the interest rate showed a direct and significant relationship with inflation reflecting the disruption of the traditional interest channel, and the exchange rate was the research recommended restoring confidence in the dinar, restructuring the interest rate to make it real positive, reducing the gap between the official and parallel exchange rates, and enhancing coordination Between fiscal and monetary policy.