Volatility of Oil Revenue and the Real Exchange, Empirical Evidence from Iraq

Abstract : This paper analyses the extent to which a boom in a particular export commodity sector (i.e., oil) affects relative price of non-tradable goods against tradable goods, the real exchange rate in the case of Iraqi economy. This paper examines whether appreciation or depreciation real exchange rate does exist in Iraqi case?. It produces some empirical evidence for the explanation booming oil sector and appreciation real exchange rate. The main findings form this paper that the Iraqi economy was subject to have the appreciation real exchange rate during high oil revenue. Some of the indications of the high oil revenue, remarkably the increase of relative prices, and the real exchange rate appreciation. The study uses annual time series data sourced from home and international agencies from 1970 to 2013. Due to problem with endogeneity, the data are analyzed through the use of two stages least square.