tend cash stomach international lending funds to look for an adequate return, this flows from the country where the rate of expected real return of financial investments, down to the country in which it is expected to yield higher.
This flow of international cash balances lead to increased demand for currency the country where the rise expected rate of return, with the survival of other factors unchanged and lead the increase in demand for the local currency to rise in value to other currencies, and vice versa this Tomb for «morning» economist Dr. Awad Fadhil.
He interval: in Iraq take the interest rate as an instrument to raise the value of local currency or strengthen its exchange rate against the dollar and thus address the inflation to Aatsag with the mechanism aforementioned.
The Iraqi economy is still economies that do not have deep enough to make the changes in the domestic interest rates exert an influence on the movement of international capital for the purposes of financial investment.
Between Fadel: Specify the money market in Iraq not to completion and narrow because of the limited financial assets, diversity and lack of foreign currency-denominated bonds in a systematic and organized in the framework of a comprehensive financial reform and institutional blurry with the private sector in economic activity. D.awwad.ban financial repression which has taken root in the minds of savers and investors for a long time and indifference to the financial guarantee of the value of real savings in the face of severe price spikes and Maatertb decline of purchasing value of money as a result of non-cash interest rate of inflation and the uncertainty of the future and the lack of political stability and the rate of response disorder and social status. All of these factors lead to vibration vision of the future economic and political situation and working to narrow the horizon and is pushing hard the possibility of the effect of the change in the interest rate in the strengthening of the local currency by flows
of Foreign Affairs.
He concluded Dr. Awad said: that Iraq balance of international reserves generated by the current account surplus offset falling external flows that can come from the surplus of the capital account, and can rely on accumulated international reserves and the amount of the surplus in the balance of payments annually in local currency support internationally and draw D.awwad.aly that the decline of the role of interest rate in the strengthening of the local currency against the dollar over channel transmission of international capital and addressing domestic inflation does not necessarily mean lack of validity of this monetary tool in helping to curb the demand for cash and calm the rise in the price level, but through a mechanism to increase savings and increase the desire to keep the national currency as an alternative to foreign currency and reduce spending and then money circulation speed.
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