Inflation targeting policy in Iraq (Actually, constraints and potential adoptions)

Abstract

Inflation phenomena is one of the ancient economic problems that faced humanity on the whole course of time.This phenomena has negative effect on the different aspects of life; the political, the economic and the social, if it was with high levels and so sever, so it always attract the attention of the economists and the center of their studies which resulted in the rise of the different theories and opinions that deal with the reasons of its rise and the treatment methods where the economic schools are varied in their opinions and tendencies to control inflation.Since more than two decades, to be specific since the closure of the eighties of the last century, a new method of managing the monetary policy to face inflation had been rose, it was known as the exposure of inflation policy, its frame and theoretical structures had been developed during the nineties of the last century which had witnessed the beginning of adopting this policy by many countries.The exposure of inflation policy gave the priority to achieving prices stability via controlling the inflation levels and obtaining its lowest and stable averages. The exposure of inflation system involves the basic elements and conditions of the economy of any country in order to adopt this system and secure the success of its application. The most important ones of these requirements are the independency of the central bank in making the monetary decisions and procedures to manage the monetary policy in a way that serve the highest country interest without any governmental interference, transparency and the highest honesty in diffusing the data relating the expected inflation rates and the monetary policy tendencies’in this field in addition to the monetary data information and statistics, asvell as subjecting the central bank to inquiry and providing the required data to put the standard samples of predicting the inflation rates and the effective coordination between the monetary and the financial policy. Many countries, more than twenty, had adopted this new policy and achieved distinguished positive results in reducing the inflation rates and activating the investment activity and the in supporting the economic development and reducing the unemployment rate comparing with the period perceiving the adoption of this policy.Iraq had suffered for a long time from the international inflation rates that had a great effect on its economy especially in the eighties and nineties of the last century due to wars, he political and economical crises, the wrong monetary policies that were resulted from the governmental interference in these policies and the dependency of the Iraqi central bank before 2003.After 2003 the Iraqi economy has witnessed great developments ; the Iraqi central bank became independent and free in its monetary procedures, the inflation rate has reduced greatly comparing with the previous years, there is no way to adopt the exposure of inflation policy because the element are not available, yet the current monetary policy resembles, in some aspects, the exposure of inflation system which involve to provide and supply these elements as a step to adopt exposure of inflation policy in Iraq in Future.