Causal Relationship According to Toda-Yamamoto Methodology Between Economic Growth Rates and Inflation in the Iraqi Economy During the Period (1990 - 2021)

Abstract

This study aims to test the causal relationship between inflation and economic growth during the period (1990-2021) in Iraq. The long-term causality test was conducted using the Toda-Yamamoto methodology, developed based on a study conducted in 1995 by Toda and Yamamoto. The results indicated a unidirectional causal relationship between economic growth and inflation, meaning that an increase in growth rates has an impact on inflation. The study recommends the implementation of monetary policies to reduce monetary growth. This could include reducing interest rates or implementing other monetary policies to control the increase in money supply, in addition to improving the supply by increasing production and enhancing efficiency in the economy. Policies encouraging investment and promoting production can contribute to meeting growing demand without causing an increase in inflation.