The Effect of Structural Parallel Exchange Rate and Broad Money Supply Shocks on Economic Inflation in the Iraqi Economy for the Period 2020–2025 Using the SVAR Model
DOI:
https://doi.org/10.71285/icpt.v3i2.59Keywords:
Parallel Exchange Rate, Broad Money Supply, Inflation, Iraqi EconomyAbstract
This study investigates the impact of structural parallel exchange rate and broad money supply shocks on economic inflation in Iraq using monthly data for the period 2020–2025. Applying a Structural Vector Autoregressive (SVAR) model, the empirical findings reveal that both the parallel exchange rate and broad money supply exert significant positive effects on inflation. However, structural impulse response functions and variance decomposition indicate that parallel exchange rate volatility is a more dominant and persistent driver of inflation than broad money supply shocks in the Iraqi rentier economy. The study concludes that stabilizing the parallel exchange rate is crucial for curbing inflationary pressures and ensuring monetary stability, necessitating coordinated policy measures by the Central Bank of Iraq.
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