The effect of the mass of money supply for the Iraqi dinar on the inflation rate during the period (2020-2022): The Iraqi economy as a model


Economists believe that the inflation rate is determined mainly by several factors, one of which is the money supply. The money supply is clearly linked to the monetary base. Thus, this study aims to determine the effect of money supply for the Iraqi dinar on the inflation rate in the Iraqi economy for the period (1M2020- 12M2022). The study found that the growth in the money supply was the result of the increase in the net assets of the banking system, as well as net government debt and private sector debt. In addition, the inflation rate was rising as a result of the change in the exchange rate and the increase in demand for goods and services caused by the increase in the money supply. The study also found that there is a relationship of mutual integration between the money supply and the inflation rate. Then, the return of the model to the state of equilibrium and the elimination of imbalances in inflation needs to (8) months and (8) days approximately through the mechanisms that are followed by the Central Bank of Iraq with its various tools. Moreover, there is a positive relationship between the money supply and inflation, and that increasing the money supply by one unit leads to an increase in the inflation rate by (1.9%) in long-term. The study recommended the need to pay attention to the money supply that reflects the economic situation, and that its components reflect the real extent of the development of the banking system and awareness of the public and the development of monetary markets. It also recommended developing a general framework for the integration of monetary tools of the Central Bank with the financial tools of fiscal policy in order to find stability for the exchange rate of the Iraqi dinar.


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