Conscious Center for Studies and Research DINAR

[patriotic party girl]

Conscious Center for Studies and Research / Prepared by: d. م The appearance of Mohammed Saleh

. I've put the monetary policy of the Iraqi Central Bank, the specific Bakannouna No. (56) for the year 2004 issue of inflation targeting and to address the rates rising and work to reduce the priority of goals to get to the situation lasting stability in the general level of prices, so by influencing the levels of general liquidity and control of the trends and work At the same time to strengthen the financial sector and balance and stability and encouraging to respond to market signals fired by the Central Bank through its monetary policy.

. So he held the Iraqi Central Bank an amendment to the interest rate adopted has the rate (policy), which became 20% since the beginning of the year 2007 before declining to 15% in 2008 to stimulate interest rates overall in the economy in order to achieve the levels of savings and high desirable commensurate with the level of revenue that stimulate the public and businesses to increase their deposits with banks as well as to address the high levels of liquidity through the role played by the reference interest rate to strengthen the mechanical moving cash to curb rising inflation.

دية . Also increased at the same time the exchange rate of Iraqi dinar against the U.S. dollar (by buying and selling auction of foreign currency since the fall of 2003) at a rate of 34% in part to curb inflationary expectations until the month of November 2008 and the balance in the money market between the desire to retain cash balances JD and the real supply of these assets by making the Iraqi dinar more attractive and more likely in the face of the phenomenon - Dollarization - and its implications for the deepening problems of replacement and hit the cash element of stability in the demand for money, which deepens the disruption of the money market. وبغية . In order to view the realities of the current monetary policy and results in lower inflation and stabilization, this paper comes to the expression of some aspects of central bank policy in accordance with the President and the monetary framework adopted at the present time. Stating the following: -

Trends and the monetary policy signals during the era of inflation

- - . Reflect the inflation phenomenon of the continuing escalation in the level of prices of goods and services, which exceeded the annual rates 76%, especially in the month of August 2006, regardless of supply bottlenecks macro and its contribution to the phenomenon of inflationary monetary policy on addressing the phenomenon and reduce the levels, especially the inflationary pressures generated by the aggregate demand or total spending in the economy.

الاساس core inflation If we exclude the two paragraphs of fuel and lighting, transport and communications of the index of consumer prices, an indicator of inflation, you can access to the so-called core inflation inflation foundation 2008 . Which reflects the pressure of aggregate demand, which stood at the end of 2006, including more than 32% per year (less than half the annual inflation rate referred to in the above) came after a decline of about 13.6% annually in the month of October 2008.

- . The state of deep-rooted in the phenomenon of inflationary and that Eshrha base and inflation resulting from the pressures of aggregate demand have led to the disruption of Amehal to the money market in terms of the public's desire to retain cash balances over the supply of such stocks. Reflecting an increase in the speed of money circulation and an increase in inflationary expectations at the same time, as it became the last main source of inflationary persistence of the phenomenon.

- (الدولرة Dollarization As money has become a non-confounded, without a doubt a good value in light of real interest rates (negative) made the people inclined to hold foreign currency as a store of value over alternative spread of the phenomenon of replacement cash (Dollarization Dollarization ) ) . ) Any use of foreign currency in domestic transactions over the narrow and weak capital market operations and limited their tools earlier in the stabilization (due to the unstable nature in the cash demand, which came under the influence of the continuous rise in inflationary expectations, which is pushing for a negative in the real interest rate).

- - :- In spite of the great capacity revealed by the monetary policy to control the stability of the foreign exchange market and the stability of the exchange rate of Iraqi dinar against the U.S. dollar throughout the years 2005 - 2006 and as Achertha exchange rates in an auction the Central Bank of foreign currency (as a market exchange central is their prices are the prices directed or leader in the exchange market), but its effects touched limited in addressing deep-rooted phenomenon in general and inflation inflationary basis, in particular due to the following reasons: -

- - اً . Decline in the dinar exchange rate real nominal level without the intervention of the central bank to defend the stability through the auction of foreign currency over the years mentioned above. . Note that this discrepancy between the nominal exchange rate and real was the result of improvement in Iraq's oil revenues over the past two years and until the present time plus the expenses of the multinational forces and other high foreign currency in Iraq, which contributed to the deepening of the phenomenon of dollarization and find a gap or difference between the price of the dinar's exchange real ( high) and the nominal exchange rate of the dinar (low in spite of its stability), which was then in the depth of the phenomenon of inflation.

- - الكلي . If the oil sector is responsible for generating 55-65% of GDP in Iraq, that has been reflected strongly on the size and installation expenses of the state budget, which has strengthened the depth of the basic inflation, after becoming the paragraph salaries, wages and flows downstream are alone for example 60% of the gross domestic product, a non-oil part of the national income ratio is responsible for generating 30-40% of the GDP total. . And this proportion of GDP is made up mostly of non-oil (ie, including more than 60%) of service activities is weak link in the productive sector commodity.

- - . As the country's monetary policy aims to reduce the levels of inflation, the package adopted by the Central Bank of Iraq in the face of inflationary conditions is appropriate begun steps in the face of inflation, mainly through the creation of influence on the desire to trends in demand for real money balances that are less than stockpiling Available those assets to achieve a balance between supply and demand of them and lead to stability and balance of the money market as we have indicated in advance. ف ) . As well as reducing the status of cash substitution and addressing the problems of dollarization (ie, raise the level of desire to keep assets in cash and up to the level of inventories by the supply of such assets). و. And at the forefront of that, comes the importance of providing a climate of disproportionate between the two activities of the Economic and price so that the ratio of money to income (ie, the cash demand) grows in a stable and consistent financial growth targets and macroeconomic stability.

-ة متشددة tighten policy On top of that package, work on strengthening the Iraqi dinar exchange rate (which represents the external value of the Iraqi dinar as well as addressing the phenomenon of replacement cash and the requirements of the availability of a tight monetary policy tighten ي :- Two-way, or by powerful signals are the reference exchange rate and the signal of interest, which enhances the transition from mechanical cash to influence the balance of the money market and then the stability of real activity and as follows: -

الاولقود . Raising the external value of the Iraqi dinar (ie, the nominal exchange rate) in a manner commensurate with the real exchange rate to contain inflationary expectations, taking into account the trends of the phenomenon of inflationary and the level of acceptance and availability of reserves, inflation and the level of acceptance and availability of international reserves at the Central Bank of Iraq and in a manner inhibits the inflationary expectations referred to above and to reduce the speed of money circulation.

policy rate Modify the interest rates of the Iraqi Central Bank policy rate . In a given financial market strong signals to changes in proportionate and desirable with the evolution of the time structure of interest rates, which helps to ensure positive returns for the majority of savers with the banking system and reduce the status of the spacing between savings and investment by borrowing is equal between the supply of money intended for lending and demand. 2005- 2006 (. Pointing in this regard that the benefit is not a monetary phenomenon, but is a real phenomenon is also related to the decisions of investors and investment returns, so the spacing mentioned the savings desired investment is desirable due to real interest rates negative in the years 2005 - 2006 (before becoming a positive since the beginning of the year 2008) which came under the influence of inflationary expectations high compared to low interest rates cash in banks and public financial ي Nominal Anchor Also, the elimination of the gap between savings and investment is through access to the interest rates are subject to equilibratory steadily and contained inflationary expectations which adopted the central bank to adopt the installed nominal Nominal Anchor . Exchange rate to stabilize inflationary expectations of the public and at the same time for the benefit of the Iraqi dinar through monetary framework adopted flexible exchange policy, but under the influence of central bank intervention in order to raise the nominal exchange rate to the level of the real.

ائدة النقدية . The phenomenon of the spacing between saving and investment means, in essence, the spacing between the productivity of investment and real return it on one hand, compared to the return on savings, particularly when the investor gets a real return on a regular plus a margin of inflation for prices of goods and services generated by the investment usually outputs, which in any case all over interest and takes its toll on the revenue savings through interest rates, banking low from the perspective of exchange market is organized, and we mean the market is not legal (of usury), which reflects the reality of the actual transactions and the real value (for the price of money) no interest away from the regulatory framework of the approved legal with the banking system Thdidalvaidp in cash.

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[4HisGlory]

WOW! Thanks for posting

I would have to be a tax expert or financial wizard to make heads or tails of what was written!! Go RV!!!!!

[RVDinar4MyFamily]

This goes hand in hand with the one you posted the other day PPG...great find!

Exchange rate to stabilize inflationary expectations of the public and at the same time for the benefit of the Iraqi dinar through monetary framework adopted flexible exchange policy, but under the influence of central bank intervention in order to raise the nominal exchange rate to the level of the real.

Edited November 23, 2010 by RVDinar4MyFamily

[gmb]

Wow great article! Thanks for the post

[Marilyn53]

Yes, it is long and I think I almost went blind reading it but it is posts like this that give us real insight. Thank you for the post!

[noskar]

Yes, it is long and I think I almost went blind reading it but it is posts like this that give us real insight. Thank you for the post!

So can you explain this to us in layman's terms, cause i really dont understand what this post means, way too long for me