Effect of developments in the money supply on inflation and output in Iraq for the period (1990-2016)


The objective of the research is to determine the nature and direction of the causal relationship between the changes in the money supply, the inflation rate and the growth rate of the GDP through the use of the joint integration test and the Granger question and annual data covering the period (1990-2016), For the purpose of building a standard model showing the effect of money supply on inflation and output, the narrow meaning of money was expressed only by the expression of M1, because Iraq's financial and banking institutions are not sufficiently developed. The hypothesis of research is that targeting inflation and output through the supply of cash in Iraq depends on the degree of cooperation and coordination in the work between monetary policy and fiscal policy, and the research found that there is a decline In the level of coordination between the monetary and monetary policies in Iraq, as confirmed by the growth rate of money supply, which changes with the changes in the policy of spending, which in turn reduced the effectiveness of money supply from controlling the levels of liquidity and output, The most important recommendation of the research is to raise the level of coordination between the fiscal and monetary policies to guide government spending in accordance with the requirements of economic growth, the adoption of an encouraging interest rate on savings, as well as covering the risk of fluctuations in the exchange rate of the Iraqi dinar.