The impact of structural economic imbalances on inflation Case Study of the Iraqi economy


There is a close relationship between rigidity and distort structure of production and productivity and inflation rates. The effects of this relationship are distorted the contribution rate of the productive sectors and the disproportionate of exchange rate in foreign trade. raising the general level of prices is one of the way that have been used by previous governments (inflationary financing or deficit financing) in order to speed up the process of capital formation, depending on the availability of economic resources idle.The fabricating inflation for development does not represent a true understanding of the nature of the Iraqi economy. Assuming the existence of productive energies ready to run directly as soon as increasing effective demand by increasing the volume of money in the economy is an incorrect assumption.Yes, there in the Iraqi economy idle economic resources (land, capital, labor, organization), But they are not ready for use in the production process.This was attributed to distort the structure and nature of the production.These problem Making those economic resources unable to engage in the production process and increase production once when the increase effective demand. This shows through low levels of productivity when compared to large economic resources in the Iraqi economy, which means the economy not having productive capacities.Even external factors (wars, economic blockade), distort the nature of the economic resources, the policy of deficit financing, higher relative prices of some essential commodities in the production process (electricity, fuel, transport, rent) led to high production costs.All that makes the Iraqi economy supply facing holistic sharp flexibility curve, not because of optimal utilization of economic resources, as in the advanced industrial countries, but because of the inelasticity productive apparatus and the economic potential for response to increasing effective demand and as shown in the following .the Iraqi economy is high money supply in the market, but it could not reduce those inflationary pressures largely due to structural imbalances facing the production and productivity process.