THE ROLE OF MONETARY POLICY IN CONTROLLING ON INFLATION RATE IN IRAQ FOR THE PERIOD (2004 - 2020)

Authors : Edrıs SALIH, Ali KABASAKAL

Pages : 89-102

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Publication Date : 2021-06-29

Article Type : Research Paper

Abstract :This paper demonstrated the role of monetary policy in controlling the inflation rate in Iraq. For this purpose, a modeling technique of the Autoregressive Distributed Lagged insert ignore into journalissuearticles values(ARDL); model has been used, and Monthly data has been collected for the period insert ignore into journalissuearticles values(31/12/2004 to 31/7/2020);. Hence, the result of the unit root test for stationary implies that the inflation rate is stationary at the level, and other variables are stationary at the first difference. However, the result of the Johansen Cointegration Test reveals the relationships between inflation rate and all variables in the long run. Moreover, the Granger causality result shows two-direction causality between narrow money supply and exchange rate granger causes inflation rate. Unidirectional granger causality between inflation rate granger causes board money supply and interest rate. Finally, the outcome of the insert ignore into journalissuearticles values(ARDL); model reveals that the money supply and exchange rate are significant and positively related to inflation. The implication is that an increase in the money supply and exchange rate leads to high inflation in Iraq. The interest rate has a significant and contradictory relationship with the interest rate and inflation rate in Iraq. It indicates that an increase in the interest rate leads to a decrease inflation rate in Iraq.
Keywords : Inflation Rate, Money Supply MS1 MS2, Interest Rate, Exchange Rate, Financial Crisis