Is it possible to solve the economic crisis in Iraq by raising the price of the dollar and reducing the national currency? Are there countries or peoples who have gone through this experience?
Depending about what problem you want to solve ...
low exchange rate of your local currency might boost your exports quoted in dollars
Reducing the currency exchange rate is not an easy task and should be done by a stronger economy, if needed. China, for instance, as a strong economy did this for exporting its goods competitively and succeeded. In Iraq's current economic situation, I think such a procedure won't be effective and it may backfire.
Lowering the national currency can lead to food shortages and inflation since imports play an important role in fulfilling domestic demand. Also, capital outflows might occur to take advantage and worsen the situation further. Not an easy economic problem to solve when dealing with expectations.
Dear Bushra,
Low exchange rate can boost domestic currency. This will increase export earning. On the other hand, it can lead to inflation.
But in the case of research, you can predict future expectation of raising the dollar price and reducing national currency by using a forecasting model. This will give you an insight of the future effects.
Regards
depending on the situation in Iraq which show many gaps in the economy reality , we can say it was not the best choice. Especially We don't have much exports except oil . so it would lead to inflation crisis. Other countries , Iran and China have a high level of domestic production rate . so they have no problem to low exchange rate of national currency.
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