ANALYSIS OF CAUSAL AND INTEGRATIVE RELATIONSHIP BETWEEN INFLATION, TERM OF TRADE AND FOOD PRICES IN IRAQ FOR 2000-2021
Keywords:
Stationary, foreign trade, optimum lag, complementary interactiveAbstract
This study mainly aims to shed light on the evolution of the inflation rate and analyze the relationship between food prices and terms of trade and the inflation rate in Iraq by analyzing the cointegration and measuring the causal relationship between them in the period 2000-2021. To achieve this, the Johansen Integration test, and the Granger methodology for causality developed by Toda and Yamamoto, was used. The research found the existence of cointegration between the variables through three equations with a significant level of 5%, as it was based on the values of the trace coefficient (8.05, 18.3, 46.1) according to the Trace test, and the existence of two equations for cointegration at the same level of significance according to the Max-Eigen Test of (0.0045) at (at most 2). The research also found the existence of a causal relationship in one direction of food prices towards the term of trade and a Bi-directional causal relationship between the food price and the rate of inflation in Iraq. In light of this, the study recommended adopting structural reforms by the government that help overcome the economic distortions that caused significant rises in inflation rates.
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Published
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2024-03-07
