Measuring and analyzing the response of the money supply to the targeted monetary policy in Iraq

Abstract

The research aims to measure the impact of the money supply response to the targeted monetary policy, and access to results includes the use of standard methods, where the standard model was built according to quarterly data using the (STATA17) program. The research concluded that there is a long-term relationship (co-integration) between the variables studied (money supply, exchange rate, interest rate) according to the co-integration model ARDL and DYNARDL. If the exchange rate (LNEX) rose by (1%), it would lead to an increase in the money supply (LNMS) by (1.43%), and the opposite happens in the case of a decline, assuming that other factors affecting the model remain constant. The state of decline, assuming that the other factors affecting the model remain constant. And when a shock occurs in the economy, the effectiveness of the exchange rate and the interest rate in influencing the money supply will differ from what it was before the shock, as the effectiveness of the interest rate towards the money supply will increase by about a third from what it was before the shock, with the inverse relationship between them remaining, while the effectiveness of the exchange rate The exchange rate influencing the money supply will decrease to less than a quarter of what it was before the shock, with the positive relationship between them remaining. Therefore, one of the most important recommendations is the continuation of the central bank’s policy of targeting the exchange rate as a nominal anchor to maintain monetary stability and the general level of prices, and paying attention to monetary shocks to avoid their effects and considering them as an indicator for determining and monitoring monetary indicators.