MEASURING AND ANALYSING THE DYNAMICS OF THE RELATIONSHIP BETWEEN MACROECONOMIC VARIABLES AND EXCHANGE RATE IN IRAQ

Abstract

The sustainability of exchange rates has turned a global concern which necessitates the contemporary research and policymakers. So, this work examines the impact of macroeconomic variables which includes economic growth (EG), inflation, population growth (PG), and industrialization, on the exchange rate in Iraq. It used secondary data sourced from the World Development Indicators (WDI) for 1991–2023. To show the suitable analytical technique, we conducted a unit root test, followed by applying the Dynamic Autoregressive Distributed Lag (DARDL) model for assessing the relationships among the variables. According to the findings, EG, inflation, PG, and industrialization significantly affect the exchange rate in Iraq. It provided insightful information to policymakers, suggesting that rules created that support industrialisation, moderate inflation, and sustainable exchange rates through successful economic growth strategies.