The Impact of Monetary Policy Instruments on Economic Growth in Iraq for the Period 2004–2024
DOI:
https://doi.org/10.31272/jae.i152.1556Keywords:
Central Bank of Iraq, Monetary Policy, Economic Growth, ARDL Model, Rentier Economy, FinTechAbstract
This study aims to analyze and evaluate the efficiency of the Central Bank of Iraq (CBI) in managing monetary policy instruments and their impact on economic growth amidst the challenges posed by a rentier economy, The study adopts a descriptive-analytical approach for the theoretical framework and an econometric approach using the Autoregressive Distributed Lag (ARDL) model via E-views software to analyze annual data for the period (2004 –2024), The independent variables selected are (Money Supply X1, Liquid Reserves Ratio X2, and Interest Rate X3), while the (GDP Growth Rate Y) serves as the dependent variable.
The study reached several key findings, most notably; The existence of a long-term co-integration relationship between the liquid reserves ratio and economic growth; however, this relationship lacked statistical significance in the short run, indicating that the impact of banking liquidity in Iraq is a structural long-term effect rather than an immediate one, Conversely, the results showed a lack of any significant impact, causal relationship, or co-integration for both (Money Supply and Interest Rates) toward real economic growth, These results are attributed to "Fiscal Dominance" and the blockage of traditional monetary policy transmission channels due to excessive reliance on oil revenues and hoarding outside the banking system.
The study recommends the necessity of enhancing coordination between fiscal and monetary policies and shifting toward FinTech (Financial Technology) and Financial Inclusion solutions, This transition is essential to activate the banking sector's role in directing credit toward productive sectors, ensuring a reduction in time lags and enhancing the overall effectiveness of monetary instruments.
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