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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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Established in 2006 as a Community of Reality

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    Inflation...between the requirements of technical drafting and the reality of spending and investmen

    Rocky
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    • Post n°1

    Inflation...between the requirements of technical drafting and the reality of spending and investmen Empty Inflation...between the requirements of technical drafting and the reality of spending and investmen

    Post by Rocky Sun 26 Feb 2023, 2:17 pm

    Inflation...between the requirements of technical drafting and the reality of spending and investment policies

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    Dr.. Haitham Hamid Mutlaq Al-Mansour         
    The technical formulation of the macroeconomic policy is based on its adoption of two strategic goals represented in growth and stability. The first is achieved by attracting investment. The second is achieved by combating price distortions affecting the general level of prices by targeting inflation.
    As the goal of growth focuses on preserving the material increase of capital, the optimal use of material and financial resources through the formation of a solid base to attract capital that maximizes the production of goods and services. While the second condition of economic welfare is achieved to ensure that these goods and services reach consumers away from the effects of inflation on them, then the role of macro policy is clear in maintaining real income levels.
    Therefore, the technical formulation of macroeconomic policy is to maintain the stability of real income growth rates, a necessary condition for macroeconomic performance in a way that enhances the rise in the real value of the quantities of cash income that represent net purchases of goods and services, and from it the importance of maintaining the stability of inflation rates becomes clear.
    In order to achieve inflation targeting, its origin and economic composition must be analyzed, as the dual nature of its origin confirms that it is the result of two paths, the first is monetary, arising from the increasing rise in the money supply as a result of public spending policies, and the second is real, arising from the structural imbalance in the commodity sector of the Iraqi economy represented by the sharp decline in the flexibility of the base. Local productivity compensated for imports.
    Therefore, the phenomenon of inflation in Iraq was represented in the accumulation of government errors with regard to planning economic policies that promote inflation and its failure to achieve one of its most important goals in maintaining stability in the rates of the general level of prices as a result of the low ability of the real current to meet the internal demand for goods and services, and then the increasing rise In the monetary flow resulting from the increase in public spending to meet the internal demand for imports due to the inflexibility of domestic production, and unsustainable internal and external debt policies that increase the resource gap and the investment gap.
     Therefore, no economic policy can ignore the negative effects of inflation on the income cycle and on the behavior of economic units. Because of the importance of this effect, banks tend to follow a policy to monitor and target inflation so that fluctuations do not have a negative impact on the effectiveness of the policy to achieve its goal of achieving stability in growth and stability in prices. Therefore, it must be From directing monetary policy to control price fluctuations and fluctuations in output, and in the rentier economy of Iraq and what it suffers from the separation between the real and monetary sector represented by the sharp decline in the ability of interest rates, but rather, its inability to move the financial market and achieve monetary balance, including its weakness as a tool that reduces inflation rates, the price remains The exchange is the effective tool in stabilizing inflation, provided that there is a sufficient balance of foreign reserves in dollars in a way that enhances the use of the window in regulating the course of supply and demand for dollars in a way that ensures the stability of inflation rates within the target level.
    From studying the data of the economic history of the phenomenon, a number of observations about the work of economic policy can be diagnosed from the nineties of the last century until this day, summarized as follows:
    The period of the nineties and before 2003 witnessed a rise in the levels of the monetary current without it being accompanied by a commodity current that covered the surplus of demand for goods and services, which concentrated in unbridled inflation.
    The period after 2003 until 2008 witnessed a continuous rise in inflation rates as a result of the high levels of monetary excess to secure imports as a substitute for local production, and the result is the continuation of inflation.
    The years from 2008 to 2019 witnessed a targeted monetary policy to reduce and stabilize inflation. Indeed, inflation readings tended to reach the decimal point.
    The period 2020-2021, which witnessed a wave of global recession due to the pandemic, as the national economy went through stagnation affected by the decline in oil sector revenues as a result of the sharp decline in global oil prices, which made the Central Bank take a decision to reduce the exchange rate of the Iraqi dinar to meet operational liabilities and secure the salaries of employees and workers in the mixed sector and salaries Social benefits, this led to a drop in the real value of money to 38% and inflation reaching 6.6%.
    The year 2022 witnessed an increase in the inflation rate, amounting to 6.8%, in a way that increases the decrease in the real value of money more than the previous year, in light of the fluctuations in the exchange rate at the end of 2022 and the beginning of 2023, and despite the Central Bank’s measures to preserve the value of the dinar through reform packages in the financial transfer system to reach stability The target exchange rate, notes the high levels of the index of foodstuffs, consumer and durable goods.
    From the observation of the fluctuation in the ability of economic policy towards sustaining inflation targeting, this is due to several reasons:
    Distortion of the movement of money and the economy through the decline in the performance of the monetary sector due to the sharp decline in the performance of the interest rate is a tool for the overall balance of the financial markets in Iraq.
    The separation between the real and monetary sectors due to the inability of monetary operations to achieve total balance except through the rentier compound.
    The stagnation of the investment sector and the inability of the economy to attract capital.
    High levels of cash flow and its dependence on public spending.
    Therefore, he concludes the importance of the targeted technical formulation for growth and stability in three axes of the macro policy:
     The first: Building and preparing the necessary ground for the development of the private and public investment sector to raise the flexibility of the productive base.
    The second: Achieving the goal of maintaining real income levels by directing the policy to its monetary and financial procedures and operations to reduce the effects of inflation. To achieve overall stability that attracts growth.
    The third: Adopting a policy to rationalize spending by enhancing investment spending and directing public spending towards productive spending, through coordination between monetary and fiscal policies.

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    Added 02/26/2023 - 10:11 PM
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