The Wave Effect of Exchange Rates on the General Index of the Iraq Stock Exchange

The study of the wave effect of exchange rates on the general index of the Iraq Stock Exchange aims to examine the potential impact of monetary policy trends on stock market performance and the role of financial and banking reforms in enhancing the financial market. Additionally, it seeks to understand how exchange rates have influenced the stock market in Iraq. The study employed the Wavelet methodology to explore the correlation between the exchange rate variable and the general stock market index. Specifically, it used the wavelet or frequency methodology developed by Grinsted et al., (2004) to reveal the co-movement between the study variables. The findings indicate a bidirectional causality extending from the exchange rate to the general stock market index and vice versa across different time frequencies and periods. The arrows point to upward and downward movements within the white cone-shaped boundary. In the short term, the relationship was initially positive and then negative, as evidenced by the arrows pointing to the upper-right quadrant, indicating a positive relationship between the variables. The arrows moved rightward in 2006 and 2007, leftward in 2010, upward in 2017, and rightward again in 2020. The results demonstrate that the stock market index is influenced by exchange rates, with an unstable relationship between them.