Causality Relationships among Inflation & Macroeconomic Variables in Iraqi

Abstract

This study examines the relationship and possible influences between inflation and macroeconomic factors. The dependent variable in this study was the consumer price index (CPI) to represent inflation, whereas the independent variables were the macroeconomic factors, namely the growth domestic product (GDP), stock of narrow (M1), interest rate (IR), and workforce (WF). The autoregressive distributed lag co-integration approach was used to test the aforementioned relationships based on data from the annual bulletin of the Central Bank of Iraq and statistical data obtained from the report of the United Nations Conference on Trade and Development on the Iraqi economy for 1990–2009. The findings indicate that correlation, co-integration, and long-term relationships exist between CPI and GDP, M1, and WF. In addition, these three macroeconomic factors significantly influence CPI. However, CPI and IR demonstrate no co-integration, a weak correlation, and an inverse relationship. Keywords: consumer price index, GDP, economic growth, stock of narrow, interest rate, workforce, economy