INDEPENDENCE OF THE CENTRAL BANK OF IRAQ AND ITS IMPACT ON ECONOMIC PERFORMANCE FOR THE PERIOD OF 2009-2018

Abstract

A pattern of transfer of authority to central banks regarding monetary policy has witnessed. Expanding central or state bank freedom is an agreed formula for governments to stabilize the monetary position of country. The focus of previous studies on estimating state bank freedom centers on the developed countries. Therefore, this study is an attempt to fill the gap in literature on the effects of central bank autonomy on economic performance. This paper endeavors to measure the level of freedom in the state bank of Iraq to record its impact on economic performance over the period of 2009 to 2018. The study utilizes the vector error correction model to capture the long run relationship between independence of central bank and economic performance. The study found a negative influence of central bank independence on inflation, real rate of interest and unemployment rate. Furthermore, a positive impact of central bank independence on GDP growth and per capita GDP has witnessed in Iraq. This study provides proof in help the hypotheses stressing the unbiased monetary policy. This study recommends the monetary performance benefits of central bank freedom. This study discovers that it is feasible for countries to accomplish the advantages of effective monetary policy by protecting the central bank from political control.