Determinants of Money Supply in Light of Price Changes in Iraqi Economy: (1990 – 2014)

Abstract

This research addresses the main factors that determine Iraqi money demand for the period of 1990- 2014, in light of continuous price changes as an appropriate approach to find effective monetary policy. The research problem was crystalized in the following questions can we estimate the function of money demand in the Iraqi economy with accordance of economic theories?. An assumption stating that price changes are among the most important factors determining money demand function in Iraqi economy was adopted. It was found, using descriptive analysis of data available on economic variables that express money demand and its determinants (Non-petrol GDP, CPI, and interest rate) and the use of modern econometric techniques. And finally, after estimating money demand function of Iraqi economy, it was found that there is an important role of what is going on in price changes in money demand volume for the studied period, which confirms the hypothesis, due to exceptional conditions through which Iraqi economy went, and still suffering their consequences including wars, financial crisis, and fluctuations in petrol prices, which emphasizes the importance of conducting research and studies on money demand and its determining variables on a continuous basis to ensure the success of monetary policy in achieving its objectives.