Determinant of the Exchange rate of the Iraqi dinar: An applied study for the period 1990-2020

Abstract

This paper seeks to examine the determinant of the exchange rate of the Iraqi dinar against US dollar. Exchange rate in Iraq has passed through two phases, the first one is adopting fix exchange rate that started from 1990 to 2003 and the other one that comes after is floating exchange rate. This paper is an attempt to examine the determinant of exchange rate in Iraq for the period of 1990 – 2020, by employing ARDL bounds test approach to explore the long-run and short-run relationship between exchange rate, interest rate, money supply and GDP. The results show that there is a short run and significant relationship between exchange rate and interest rate, money supply and GDP. Accordingly, controlling exchange rate needs a mixture of fiscal and monetary policies. The findings shed some new insights for policymakers on dealing with exchange rate in Iraq.