Analyzing Relation Between Inflation and Macroeconomic Variables

Inflation has been distorting the progress of the Iraqi economy; moreover it has contributed to prolonged economic instability. This study examines the relationships between inflation and key macroeconomic variables. It is primarily based on data from the Central Bank of Iraq's annual bulletin for variables such as GDP M1 and interest rate (IR). Additionally workforce (WF) data was extracted from UNCTAD statistical sources.An ARDL co-integration approach was used to investigate correlations co-integration and long-run relationships among the variables. The findings reflect the existence of co-integration and correlation as well as the nature of these relationships. The results indicate a co-integration and long-run relationship between GDP and the Consumer Price Index (CPI) along with a significant correlation. Similarly a strong co-integration and long-run relationship was found between CPI and M1. A positive correlation was also observed between WF and CPI suggesting that the increase in CPI may be attributed to an increase in workforce size. However no co-integration or long-run relationship was found between IR and CPI.