The neural network and the exchange rate
Tuesday 05 January 2021 47
Dr. Mustafa Kamel Rashid
God Almighty has placed in the human body a sensing device called the nervous system, one of its tasks is to transmit sensory, nervous and emotional signals of joy, pain, anger and happiness to the nerve center, and then to the brain through a complex neural network spread in all the details of the other organs in the human body.
Were it not for the nervous system, we would not have sensed what is going on around us and interacted with it. So the neural network makes us feel all the internal and external details in our body.
The same is the case with the exchange rate, as it is the advisory device that tells us how much better or worse our economy is.
When we have production of goods and services requested by foreigners, the exchange rate for our local currency rises immediately to tell us that we have achieved a new victory in the international markets.
And if our goods and services do not receive foreign approval, the exchange rate will immediately meet the call in the form of a decrease in the exchange of our local currency, and the same is the case for the rest of the local markets.
For every real, financial or monetary transaction that takes place in our economy, we find the exchange rate that tells us about it in its way through the rise or the decrease (provided that) Adopting the free drainage system).
Today, the exchange rate of the Iraqi dinar has crossed the barrier of (1450) per US dollar, after taking a period of time stable between the limits of (1230-1200) dinars per US dollar.
The question that arises here is why this rise occurred?
The simple answer is that the Central Bank of Iraq was fighting alone to maintain the exchange rate of the dinar without the decision maker being indifferent to the importance of the local economy and the role of its productive activities in pricing the exchange of the Iraqi dinar.
Despite the depletion in the foreign exchange reserves that resulted from the foreign currency selling window.
But this measure in the absence of the production of local goods and services and their replacement with imported goods and services, and the defense of many parties from this reality for special benefit, made the mechanisms of the Central Bank of Iraq in maintaining the exchange rate fraught with risks.
Any new setback to the economy will immediately translate into a deteriorating exchange.
This is what really happened due to the repercussions of the Corona pandemic in international crude oil prices, with a complete recession of the local economy and a complete distortion of its production relations.
This made the exchange rate unable to withstand this environment.