Analysis of the equilibrium interaction between the exchange rate and international trade rates and its impact on the Iraqi economy for the period (2010–2025)

Abstract

The study aims to analyze the equilibrium relationship between the exchange rate and the international trade rates (ITR) in the Iraqi economy during the period 2010–2025, using ARDL model. The significance lies in the crucial role of exchange rate fluctuations in influencing external economic performance, The experimental results show that all variables are first-order complementary, The bounds test confirms a long-run equilibrium relationship between the exchange rate and ITR. Furthermore, the long-run estimation results indicate a significant inverse relationship between the two variables, suggesting that the depreciation of the Iraqi dinar leads to a deterioration in the ITR. In the short run, the results show a relatively weak effect of exchange rate fluctuations on the terms of trade, while the error correction coefficient is negative and statistically significant, indicating a moderate rate of adjustment towards equilibrium. The study concludes that exchange rate policy alone is insufficient to improve the ITR.