Iraqi Monetary Policy: From Monetary Aggregates To Interest Rate 2004-2011

Abstract

Although the importance of monetary aggregates in monetary policy, but this field of economics witnessed increasing use of interest rate as nominal anchor instead of aggregates. So this paper deals with Iraqi monetary policy via testing the role of interest rate in formulating Iraqi monetary policy according to Taylor rule. Some Iraqi officials indicated to attempts toward adopted Taylor rule in managing monetary policy. The results show the inability to apply the Taylor rule within inflation and GDP Gaps, because the monetary behave isolated from the real activities of Iraqi economy. The rental features of Iraqi economy and weak contribution of real sector offsite the role of interest rate in transmitting the monetary effects toward Iraqi real economy, and reflects a weak relationship between real and monetary sectors. for the Exchange rate tool and its use as a mean to fight inflation, it is the most effective tool in influencing variables of the national economy, both monetary and real variables, where the statistical tests have proven the significant role played by the exchange rate to influence inflation and output.