The effect of fluctuations in exchange rates on Iraq's export and import

The exchange rate is an important factor that determines the import and export costs of countries on the one hand and affects international competitiveness in foreign trade on the other. Therefore, ensuring stability in international trade requires an understanding of the relationship between the exchange rate and foreign trade. Therefore, this study aims to analyze the impact of exchange rate fluctuations on Iraq's foreign trade. For this purpose, the effects of exchange rate, GDP of foreign trade partner countries, Iraq's GDP and oil prices on imports and exports are analyzed for the period 1990-2022. Non-linear time series models including NARDL and MSR models were used as econometric methods in the study. The findings from the NARDL model reveal that exports are positively affected by the GDP of foreign countries and oil prices, while imports are positively affected by Iraq's GDP and oil prices. According to the findings obtained from the MSR model for exports, the GDP of foreign countries and oil prices positively affect exports in low and high volatility regimes, but the effect of exchange rate on exports is positive in the low volatility regime and negative in the high volatility regime. On the other hand, the findings from the MSR model for imports show that the effect of Iraq's GDP and oil prices on imports is positive in low and high volatility regimes. Based on the findings, macroeconomic policies for exchange rate stability should be established to minimize the negative impact of exchange rate on exports in high volatility regimes. Moreover, given the impact of oil prices on imports, protection against changes in oil prices should be provided and economic buffer mechanisms should be developed for this purpose. Finally, since there is a positive correlation between the economic growth of foreign countries and Iraq's trade volume, strong economic relations with foreign trading partners should be established and maintained.