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The Effect of Interest Rate on The Volume of Cash and Pledge Credit in Iraq (2004-2016)

Journal: Millennium Journal of Humanities and Social Sciences (Vol.2, No. 1)

Publication Date:

Authors : ;

Page : 44-59

Keywords : Interest rate; cash credit; pledge credit; cash interest rate; real interest rate; inflation rate; linear model and cubic model;

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The interest price is one of the important tools of monetary policy to affect the financial and economic variables, including cash and pledge credit, with the aim of activating the economic movement in the country. The Central Bank followed a policy of reducing the base interest price until it reached 4.33% in 2016, but this decrease didn't lead to the energizing of cash and pledging credit in a way that leads to the productive sector's advancement, as the Iraqi economy is a rentier economy and oil revenues have acquired a large proportion of the domestic income of Iraq. Also, individuals hoarding their money away from the banking system have made the interest price lose its role in influencing at the credit extant. The research aims to measure the effect of basic interest price changes on the extant of cash and credit through descriptive and standard analysis for the period (2004-2016). The research is based on the hypothesis that weakness of the correlation and significant impact between interest prices and the extant of cash and pledge credit led to weakness the credit of both types in stimulating investment. The research reached a set of conclusions, the most important of which is the existence of a weak relationship and there is no statistically significant effect of the independent variable (interest price) on the dependent variable (cash and pledge credit) and there is an inverse relationship between them, which is consistent with economic theory. The research concluded with a set of recommendations, the most important of which is the activation of the interest price role as one of the monetary policy tools to influence cash and pledge credit, and commercial banks must coordinate and cooperate with the Central Bank of Iraq to study and determine the interest price and review interest rates periodically and continuously.

Last modified: 2021-02-18 16:44:18