Iraqi citizens and hammer monetary policy ... Challenges low dinar exchange rate against the greenba

Iraqi citizens and hammer monetary policy ... Challenges low dinar exchange rate against the greenback

The first part

Prof. Dr. Jawad Kazem Al-Bakri

Babylon University-Faculty of management and Economics

Monetary policy is one of the most important areas of economic policy, it means money relationship with economic activity on the one hand, and the monetary stability of the appropriate climate for economic activity to members of the community on the other.

Monetary policy is the set of procedures used by the country's highest monetary authority (represented by the Central Bank) with a view to influencing the money supply (the amount of money circulating in the economy), to reach a set of economic targets, they reflect the range of texts, laws and actions by the Monetary Authority to influence the money supply expansion or contraction in order to achieve specific economic objectives.

It is no secret that monetary policy, particularly in developing countries, such as Iraq, be one of the most important causes of internal and external imbalances, together with other economic variables, and if the most important monetary policy goals is to achieve economic stability somewhat balanced growth, it means that there is a close link between economic activity and cash and shows this through a link of economic problems, including unemployment, inflation, balance of payments, monetary policy by the Government.

Among the most important objectives of monetary policy is: to achieve an acceptable level of economic and monetary stability by avoiding changes in the value of the national currency internally and externally which arise through changes in the general price level first, and contribute to the achievement of appropriate economic growth rates in the various economic sectors to increase national income and GDP growth when the successful monetary policy in economic stability and boosting production when increasing the money in the market in a recession, or reduce the amount of money in In the case of market inflation, stabilize prices at a certain level, i.e. the Elimination of inflation in prices, and to eliminate economic and social expenditure to inflation.

And monetary policy tools to achieve the above objectives, normally the Central Bank uses to influence the economic situation:

• Change the reserve ratios: it is known that the legal reserve ratio is the percentage of cash commercial banks must keep at the Central Bank of the volume of deposits in those banks, so if he wants the Central Bank to increase the money supply by increasing the ability of commercial banks to create money, the Bank in this case, for example, the legal reserve ratio is reduced from 40% to 20%, increasing the ability of commercial banks to grant credit and money creation, money supply increases and vice versa if the Bank Central reducing money supply by reducing the ability of commercial banks to create money.

• Open market operations: intended for the Central Bank to buy or sell government securities to control the monetary base, if the goal is to increase the money supply, the Central Bank purchases of Government securities from commercial banks, and paying for the cheques drawn on the Central Bank, and these checks are deposited in commercial banks and the commercial banks have to expand the size of the credit and creating money from term deposits, And then increase the money supply, if the goal is to decrease the money supply, the Central Bank sells Government securities.

• Change the price discount: discount price is that part of the interest acquired by the Central Bank as a result of commercial banks for discounting its commercial papers against customers, and now you re deducted at the Central Bank, also known as the bank rate, when the Central Bank discount rate changes, it changes the money supply, if the goal is to expand the money supply, the Central Bank lowered the discount rate, and thus encourages banks to borrow from it and if the monetary base and display Money increase.

And Iraq has been applying tool through open market operations auctions sale of foreign currency by the Central Bank when the CPA was ordered in 2004 by the Central Bank to sell dollars to the market in the light of the objectives of monetary policy, as the Central Bank uses monetary policy instruments at its disposal, in particular the recruitment of Iraqi dinar exchange rate as a means to control inflation and curb the Central Bank intervention in the exchange market to raise the value of the dinar against the dollar and to defend The value of the dinar to satisfy every demand for dollars at this price through the sale of dollars to banks and licensed money transfer companies in the currency auction, organized by the World Bank, the Iraqi dinar has been maintaining its value against other currencies since the introduction of this tool until December 2012 and beyond with this policy, and some other monetary policies, Iraqi citizens from the fallout of the inflation problem.

But from January 2013 started gradually increasing inflation rates, the record in the said month high index year & # 65275; consumer prices rate (0.6%) Compared to the month of December, 2012, and since then started coming increases in the consumer price index rate (0.6%, 0.1%, 0.5%, 1.1%) For the months of January, February, March, April 2013 respectively.

Returns increase indicators consumer price index to rising prices for some commodities such as partitions (food, clothing, housing, vegetables, tobacco, health, education, catering, transportation, and entertainment).




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