Measuring and analyzing the impact of monetary policy on the fiscal deficit in Iraq

Abstract

The study aims to measure and analyze the impact of monetary policy on the fiscal deficit, as well as to evaluate monetary economic variables in Iraq. It also aims to identify the nature, causes, and treatment of the fiscal deficit during the period (1990-2022) in Iraq. Annual data was used in the analysis. This study aims to provide a quantitative analysis of this relationship in Iraq over a specific period. It uses quantitative economic analysis tools such as autoregressive distributed lag (ARDL) models to test the dynamic relationship between monetary policy variables and the fiscal deficit, thus providing a cognitive framework that can support decision-makers in adopting more coordinated and effective monetary and fiscal policies. Annual data was used in the analysis, as the study aimed to measure the impact of economic variables, including government spending, inflation, nominal interest rates, broad money supply, and public debt, on the dependent variable, the budget deficit or surplus. To ensure the accuracy of the results, an autoregressive distributed lag (ARDL) model was used. One of the factors leading to the persistence of the deficit is the lack of coordination between monetary and fiscal authorities, which has led to conflicting economic objectives and policies.