EVALAUTION THE SENSITIVITY OF EXCHANGE RATE OF IRAQ BILATERAL AGRICULTURAL TRADE DURING THE PERIOD 1995-2014

Abstract

This paper examines the short term and long term effects of changes of Iraqi dinar exchange rate versus American dollar on bilateral trade flows of some agricultural products for Iraq with its major trading partners (Syria, Jordan and United Arab Emirates) in sector of agricultural and food products trade. Accordance to the J-curve theory Johansen cointegration test was employed to analyze the long term relationship and an error correction model was employed to explore the short term effects of Iraqi dinar exchange rate level. The data set used in this study covered the period from 1995 to 2014. Agricultural and food commodity groups in this study are divided according to the SITC classification. The results showed that if the Iraq foreign trade in agricultural sector is disaggregated into specialized commodity group, there can be found only some sectors significantly connected with rate movements in the long term. The effects of exchange rate movements are less than ambiguous and cannot be generalized across the commodity groups. Theoretical short term and long term assumptions cannot confirmed in trade of most of agricultural trade of Iraq with its most important partners.