MEASURING AND ANALYSING THE IMPACT OF EXCHANGE RATE FLUCTUATIONS ON IMPORTS AND THEIR IMPLICATIONS FOR INFLATION IN IRAQ USING THE ARDL MODEL

Burhan Othman Hussein; Ehsan Jabr Ashoor

Авторы

Burhan Othman Hussein College of Administration and Economics, University of Kirkuk
Ehsan Jabr Ashoor College of Administration and Economics, University of Baghdad

Ключевые слова:

Parallel exchange rate, import bill, imported inflation, government expenditure, Iraqi economy

Аннотация

The current study attempts to measure and analyse the impact of exchange rate fluctuations on imports and their implications for inflation rates in Iraq over the period 2004–2025. To identify the nature of the short- and long-run relationships among the study variables, an econometric approach based on (ARDL) model was adopted. The estimation covered only the period 2013–2025 because quarterly data were not available for the remaining years, despite the importance of the economic events and changes that occurred during that period. The findings uncovered the existence of a long-run cointegrating relationship among government expenditure and imports. Government expenditure constitutes the main driver of the increase in the import bill. By contrast, the effect of the parallel exchange rate on imports is confined to the short run because of the low price elasticity of demand. The study also showed that variations in the parallel exchange rate constitute the direct driver of imported inflation in the short run, with no evidence of a long-run equilibrium relationship between imports and inflation owing to monetary coverage at the official exchange rate. Accordingly, the study recommends tighter control over the exchange-rate gap and directing government expenditure towards developing the domestic productive base.

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