ANALYSIS OF THE RELATION BETWEEN INFLATION AND FOREIGN EXCHANGE RATES FOR THE NORTHERN REGION OF IRAQ

Year 2019, Issue: 24, 171 - 184, 24.07.2019

Arzdar Kiracı , Semih Serkant Aktuğ , Farhang Abdulkareem Aqrawı Mehmet Dağ

https://doi.org/10.18092/ulikidince.533805

Abstract

The purpose of this study is to examine the relation
between the inflation rate, foreign exchange rates of the major currencies used
in the northern region of Iraq (NRI), money supply and gross domestic product
(GDP) for the period 2008-2016. It is notable that the region suffers from high inflation rates and
there were fluctuations in foreign exchange rates after the fall of the former
Iraqi regime in 2003. This is the first article about this subject for NRI using
an error correction model and the results indicate that there is a long-run
relation between variables. The relation between US Dollar and inflation in the
region is positive and statistically significant. There is a negative relation
between Euro and inflation, which is also statistically significant. NRI
imports many goods and services from Turkey, but a surprising result is that
the Turkish Lira variable is not statistically significant. This may be due to
the fact that import payments are done with Dollars and not Turkish Liras. There
is also a negative long-run relation for the variables GDP and money supply,
which are not statistically significant. In the analysis, money supply by the
Iraqi Central Bank was used as the money supply variable, but the amount of
money supply in the NRI is not proportional to the amount offered by the
Central Bank, there is no advanced banking system in the region. The amount of
Dinar coming into the region consists of converting the oil export revenues
into Iraqi dinar and supplying these Dinars as payments to the market.
Therefore, the NRI money supply will depend on the oil revenues and the Dollar,
which makes money supply variable statistically insignificant.

ANALYSIS OF THE RELATION BETWEEN INFLATION AND FOREIGN EXCHANGE RATES FOR THE NORTHERN REGION OF IRAQ

Abstract

Bu çalışmanın amacı; enflasyon, Irak'ın kuzey
bölgesinde (IKB) kullanılan ana para birimlerinin döviz kurları, para arzı ve
gayri safi yurtiçi hasıla (GSYH) değişkenleri arasındaki ilişkiyi 2008-2016
dönemi için incelemektir. Bölgenin yüksek enflasyon oranından muzdarip olması
ve 2003 yılında eski Irak rejiminin düşmesinden sonra döviz kurlarında dalgalanmalar
olması dikkat çekicidir. Bu çalışma, IKB için bir hata düzeltme modeli kullanan
konudaki ilk makaledir. Sonuçlar değişkenler arasında uzun vadeli bir ilişki
olduğunu göstermektedir. ABD Doları ile bölgedeki enflasyon arasındaki uzun
vadeli ilişki pozitif ve istatistiksel olarak anlamlıdır. Euro ile enflasyon
arasında negatif bir ilişki vardır ve bu istatistiksel olarak anlamlıdır. IKB
Türkiye'den birçok mal ve hizmet ithal ediyor olmasına rağmen şaşırtıcı bir
sonuç, Türk lirası değişkeninin istatistiksel olarak anlamlı olmaması. Bunun
sebebi, ithalat ödemelerinin Türk Lirası ile değil Dolar ile yapılması
nedeniyle olabilir.

Keywords

Inflation Rate, Foreign Exchange Rate, Money Supply, GDP, Error Correction Model

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