Analysis of the financial and monetary effects of the dollarization phenomenon in selected economies with a reference to Iraq

A Thesis Submitted to The Council of Management and Economic College

University of Karbala

By Husam najeh mezher

As Partial Fulfillment of the Requirements for The

Degree of Master of Science in Economics

Supervisor By:

Prof. Dr Safaa Abdul Jabbar Almusawi

abstract

     The economies of the world have known the phenomenon of dollarization, which is one of the important economic phenomena in times of crises and the decline in local economic performance, especially the conditions in which inflation rates are exaggerated, as well as a result of financial liberalization and the opening of the financial market to the flow of foreign capital. Important effects in the economic environment of dollarized countries, where iron from the developing countries and transitional economies adopted the foreign currency and allowed it to trade alongside the local currency to perform the basic functions performed by the local currency, and the dollarization phenomenon has implications for many of them related to monetary policy, including those related to The fiscal policy has implications for the two policies.

     The dollarization phenomenon poses a number of challenges to the fiscal and monetary policies, and these challenges are reflected through compromising the independence of monetary decision. The main objectives of the study focused on trying to analyze the effects that the dollarization phenomenon can have in the economy and in an attempt to understand and explain why some economies use foreign currency instead of local currency in Making transactions or using them as a means of preserving value, which led us to choose the subject of the study.

    The study proceeds from the hypothesis that dollarization poses a number of challenges to the effectiveness of the fiscal and monetary policies, which leads to a decline in their role in achieving economic goals. It is expected that there is a direct reciprocal relationship between dollarization rates and some indicators of economic imbalance.

     In order to verify this hypothesis and reach the objectives of the study, the structure of the study was divided into three chapters. The first chapter dealt with an introduction to dollarization and fiscal and monetary policies. The second chapter dealt with the theoretical framework and the financial and monetary effects of the dollarization phenomenon. The third chapter dealt with the analysis of the financial and monetary effects of the dollarization phenomenon in The Egyptian economy, the Turkish economy, and the Iraqi economy for the period (2004-2018).