The Effectiveness of Fiscal and Monetary Policies on the Capital Account in Iraq for the Period (2004-2022)

Abstract

This research aims to understand the effectiveness of fiscal and monetary policies on the capital account in the Iraqi economy for the period (2004-2022). This is achieved through a quantitative analysis of their indicators and their impact on the capital account in the Iraqi economy. The empirical results indicate that both fiscal and monetary policies significantly influence the capital account in Iraq in both the short and long terms. The results show a long-term equilibrium relationship between fiscal and monetary policies and the capital account, with a value of (-0.10) and a significance level of less than 1% in Iraq during the research period. Fiscal policy variables played a role in increasing the capital account during the research period. Among fiscal policy variables, revenues had the most significant effect, with a probability value of (0.007) and a significance level of less than 1% for the first model, and (0.000) for the overall model. Monetary policy variables also had a substantial impact on the capital account by stabilizing parallel exchange rates and the Central Bank's various interest rate policies, which significantly attracted capital inflows. It was found that the most effective variable was the parallel exchange rate, with a probability value of (0.000) and a significance level of less than 1%. The most influential variable in both policies was the parallel exchange rate, as evidenced by the empirical results during the study period.