Call for exchange rate stability in the reconstruction of the economy

Call for exchange rate stability in the reconstruction of the economy

15/1/2014 12: 00 am 

Money market balance is one of the indicators

Baghdad-Hussein thghb Al-Tamimi

The objectives of monetary policy to achieve economic growth and stability and reduce unemployment rates, the stability of prices of goods and services, as well as stable exchange rates and improved balance of payments position and achieve these goals through the use of monetary policy instruments, direct and indirect.

This discussion started in charge of Banking Affairs Samir Al-nasiri said that achieving the goals of monetary policy through regulations issued by the Central Bank of Iraq during the past years and finally what was released in the vernacular for 2012 and 2013. 


Cash replacement


Nasiri pointed out to the importance of maintaining the balance of the money market and to strengthen the Iraqi dinar exchange rate that represents the value of the dinar
, 
as well as deal with the phenomenon of critical replacement and the availability of tight monetary policy in two directions or strong signals they exchange and interest rate, 

indicating

it is enhances mechanical moving cash to influence the money market balance and stability of the real activity that requires raising the value of Iraqi dinars in a manner commensurate with the real exchange rate to contain inflationary expectations
, 
and modify Iraqi central bank interest rates to give a strong signal to the financial market changes and desirable with the evolution of the structure of interest rates.


He noted that a key task for the Central Bank of Iraq is building the foreign cash reserve to promote and cover the Iraqi dinar exchange rate and creating economic stability, which is an indicator of the success of monetary policy applications.


Balanced rate


He said: the current structure for the stability of the exchange rate has given the opportunity for the Iraqi economy to rebuild and grow, although the price has not fully stabilized, due in part to instability and the nature of the circumstances in the country, where the central policy to maintain a balanced rate for Iraqi dinar amounts 1233 as dinar 31/12/2012 stands at 1,200 dinars in August 2013. 

Within this context, the Central Bank has succeeded in collecting high reserves of foreign exchange, the contribution install Iraqi dinar exchange rate against the US dollar, is appropriate and required at the current stage, with foreign reserves by $ 76 billion, and must indicate the role played by the private banking sector in achieving that stability by implementing the central policy.


Aggregate demand pressures


Pointing to the need to reduce inflation and if the root in the inflationary phenomenon ordeals inflation resulting from aggregate demand pressures, which led to the disruption of market in terms of the public's desire to retain cash balances over the supply of such stocks. Reflecting the increase in the speed of the circulation of money and increase in inflationary expectations at one time, it has become the latest source of continued inflationary phenomenon that was aimed at curbing runaway inflation of the main objectives of monetary policy.


The phenomenon of dollarization


And on the face of the phenomenon of dollarization said nasiri: dangling money is undoubtedly good value stock is under negative real interest rates make people prone to keep foreign currency as an alternative store of value over widespread cash replacement (dollarization) which use foreign currency in domestic transactions was therefore confront this phenomenon positive impact as one of the objectives of monetary policy.


Currency manager


In the detailed currency management system reform between the Iraqi Central Bank 
currency management system adopts any shift from a small amount of money going after a large amount of the price of services and reflects stability, growth and prosperity 
on the basis of the draft proposed to delete the zeros of the Iraqi dinar from considerations of good management of the monetary system and the shift from mass to mass flaccid cash cash easy or creativity.

[You must be registered and logged in to see this link.]