Thread: Iraq/Dinar News. 09/05 to 01/14/07

Originally Posted by Pippyman

Interesting article from the IMF on exchange rates......


Fixed or Flexible?
Getting the Exchange Rate Right

Economic Issues No. 13 -- Fixed or Flexible?--Getting the Exchange Rate Right in the 1990s

Adjusting to Capital Inflows

"In many fast-growing emerging market economies, upward pressure on the exchange rate in recent years has stemmed largely from vastly increased private capital inflows. When capital inflows accelerate, if the exchange rate is prevented from rising, inflationary pressures build up and the real exchange rate will appreciate through higher domestic inflation. To avoid such consequences, central banks have usually attempted to "sterilize" the inflows–by using offsetting open market operations to try and "mop up" the inflowing liquidity.

Such operations tend to work at best only in the short term for several reasons. First, sterilization prevents domestic interest rates from falling in response to the inflows and, hence, typically results in the attraction of even greater capital inflows. Second, given the relatively small size of the domestic financial market compared with international capital flows, sterilization tends to become less effective over time. Finally, fiscal losses from intervention, arising from the differential between the interest earned on foreign reserves and that paid on debt denominated in domestic currency, will mount, so sterilization has a cost.

As capital inflows increase, tension will likely develop between the authorities’ desire, on the one hand, to contain inflation and, on the other, to maintain a stable (and competitive) exchange rate. As signs of overheating appear, and investors become increasingly aware of the tension between the two policy goals, a turnaround in market sentiment may occur, triggering a sudden reversal in capital flows.

Since open market operations have only a limited impact in offsetting the monetary consequences of large capital inflows, many countries have adopted a variety of supplementary measures. In some countries the authorities have raised the amount of reserves that banks are required to maintain against deposits. In others, public sector deposits have been shifted from commercial banks into the central bank–to reduce banks’ reserves. A number of countries have used prudential regulations, such as placing limits on the banking sector’s foreign exchange currency exposure. Some central banks have used forward exchange swaps to create offsetting capital outflows–although there appear to be limits on how long such a policy can be used, given the likelihood, as with open market operations, that it can cause fiscal losses. In other cases the authorities have responded by widening the exchange rate bands for their currencies, thus allowing some appreciation. And a few have introduced selective capital controls.

While such instruments and policies can for a time relieve some upward pressure on a currency and ease inflationary pressure, none appears to have been able to prevent an appreciation of the real exchange rate completely.

Can exchange rate flexibility help manage the impact of volatile capital flows? As mentioned earlier, if interest rates and monetary policy are "locked in" by an exchange rate anchor, the burden of adjustment falls largely on fiscal policy–that is, government spending and tax policies. But often taxes cannot be raised or spending reduced in short order, nor can needed infrastructure investments be postponed indefinitely. (Clearly, policymakers who cannot adjust fiscal policy in the short run should not adopt a rigidly fixed exchange rate regime.) Allowing the exchange rate to appreciate gradually to accommodate upward pressures would appear to be a safer way of maintaining long-run economic stability. Furthermore, by allowing the exchange rate to adjust in response to capital inflows, policymakers can influence market expectations. In particular, policymakers can make market participants more aware that they face a "two-way" bet–exchange rate appreciations can be followed by depreciations. This heightened awareness of exchange rate risks should discourage some of the more speculative short-term capital flows, thereby reducing the need for sharp corrections."

"This amount of 10000 dinars has not been given out yet and I doubt the Iraqi people would accept such an amount which represents a few dollars as one would accept a much greater amount as we hold the second largest oil reserve in the world and we are one of the richest countries in the region" Manager Iraq International Foreign Relations Dept

H O L Y M O L E Y ! THAT'S MORE THAN A WOOT!
THIS IS HUGE! OUR REVAL IS GOING TO BE HUGE AND SOON! [/COLOR]

The power of "purchasing power parity"....

http://www.imf.org/External/Pubs/FT/...pdf/cashin.pdf


This paper tests for purchasing power parity (PPP) using real effective exchange rate data for 90 developed and developing countries in the post–Bretton Woods period. Support for PPP is found, since the majority of countries experience finite deviations of real exchange rates from parity. The speed of parity reversion is found to be typically much faster for developed countries than for developing countries and to be considerably faster for countries with flexible nominal exchange rate regimes compared with countries having fixed nominal exchange rate regimes.





"The theory of PPP, in its most rudimentary form, states that there is an equilibrium level to which exchange rates converge, so that foreign currencies should have the same purchasing power.1 Therefore, long-run PPP is inconsistent with a unit root in real exchange rates....

We conclude that the majority of countries in our sample have real exchange
rates that revert (albeit sometimes slowly) to PPP and, thus, that PPP holds in the post–Bretton Woods period....

That is, countries with higher inflation rates tend to have shorter lived deviations of their real exchange rates from PPP, which suggests that parity reversion is fast when price movements largely reflect monetary shocks....


Productivity growth is a supply-side factor that can affect the persistence of real exchange rate shocks. The Balassa-Samuelson effect has traditionally been the most popular explanation for the persistence of parity deviations. The Balassa- Samuelson hypothesis highlights the potential effects of differential productivity growth (favoring the traded goods sector) on the behavior of real exchange rates, which ultimately raises the relative price of nontraded goods.
We thus conclude that there is little evidence that either higher productivity
growth or greater government spending can explain much of the observed
pattern of deviation from PPP across countries. Our conclusions are consistent
with those of Rogoff (1996).

V. Conclusion
The validity of purchasing power parity (PPP)—the notion that prices in different countries move toward equality in common currency terms—is of interest to policymakers for two main reasons. First, PPP provides a long-term benchmark for the equilibrium value of exchange rates and, as such, is a criterion for evaluating the competitiveness of real exchange rates. Second, PPP has been adopted as a central building block of many theories of exchange rate determination; the quality of policy advice based on these theories may depend on the validity of PPP.....


Finally, when we examine the determinants of the observed cross-country heterogeneity in the persistence of reversion of real exchange rates to parity, we find that parity reversion tends to be faster in high-inflation countries than in low-inflation countries and slower in countries with less nominal exchange rate variability."

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1.00 USD
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Iraq Dinars
1 USD = 1,322.15 IQD 1 IQD = 0.000756344 USD
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Sunday, December 31, 2006

1 Iraqi Dinar = 0.0007927 US Dollar
1 US Dollar (USD) = 1261.50 Iraqi Dinar (IQD)

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Median price = 0.0007232 / 0.0007927 (bid/ask)
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Down 8.22!

From this yesterday: Baghdad Time: 05:00am, 12/30/2006 ~ market is closed | $1 USD = 1337.00 IQD ^

To this Today: Baghdad Time: 09:25am, 12/31/2006 ~ market is closed | $1 USD = 1324.00 IQD ^

I thought the Markets were closed in Iraq.

The name of God the Merciful

Prime minister

Media Bureau

10/12/2006

Sunday, 10 / 12 / 2006

Mr. Prime Minister, will meet ambassadors of the countries participating in the International Covenant with Iraq

The Prime Minister invited Mr. Nuri Kamal al-Maliki to effective international presence in the International Conference on Iraq, stressing that the issues to be discussed at the Conference will Tekatasserali economic side, but will extend to aspects of security, politics and international relations and the issue of national reconciliation, This came during the meeting of the ambassadors of the sovereignty of participating in the International Covenant with Iraq.

He stressed the importance of activating the sovereignty principle of national reconciliation and integration between the central aspects of the political, economic, security and Iraq's desire to create a relationship based on common interests.

And Mr. Prime Minister : Iraq suffers from the obligations imposed on them by the policies of the previous regime, including the debt which was imposed on him, and hoped that the conference is a practical step on the road to helping Iraq and revive its economy.

He suggested sovereignty to the participating States to the International consider that the solution to the debt problem in order that Iraq will be able to achieve a decent standard of services, indicating that the debt burden on the Iraqi economy now stands at $ 75 billion.

The price of Mr. Prime Minister efforts the Japanese government for its initiative in launching the first batch of very soft loan worth $ 1.6 billion for the development of the oil and electricity.

He pledged the support of the ambassadors of the participating Iraq and fulfill its commitments to the advancement of the Iraqi economy and improving the infrastructure and developing the standard of services and contribute to the national reconciliation efforts.

The meeting was attended by ambassadors of the United States, Britain, Japan, Italy, Turkey and Germany and representatives from the United Nations, the World Bank and the European Union, and attended by the Iraqi Deputy Prime Minister Barham Salih and the ministers of planning, finance and State for Foreign Affairs

Originally Posted by www.xealthy.com

The name of God the Merciful

Yeah, it was posted 3 weeks ago.

General Directorate of retirement begin dispatched, so that the implementation of the new mechanism for the pension law

Baghdad / Department of Justice announced that it would launch public pension dispatched, so that the implementation of the new mechanism for the pension law passed by the House of Representatives recently.

The director said the retired general renewed in a press statement that "the new law will give the retired account for 80% of the salaries of their peers who are in service." Adding that "The increase in the salaries of retirees are in a reverse way, relying on a new salary, which divides the staff to ten degrees will be to increase by 50% for the higher grades, 80% of the minimum salary levels low." He renewed the "application of the components of the salary will be according to the certificate and years of service.

Translated version of http://www.aladalanews.com/

1. One hundred thousand dinars for the displaced families on the occasion of Eid
Bahgdad justice

Cabinet decided to allocate the sum of 100 thousand dinars for each family of migrant forcibly donated to the occasion of the Eid Al-Adha holiday

He said Prime Minister Nuri al-Maliki during a meeting of the Council of Ministers devoted to the review of what has been accomplished during this year : "This grant will be distributed from the remaining budget for the secretariat of the Council of Ministers for the current year." He explained : "The grant included within the nation exclusively According to the Statistical publicly to the Ministry of Displaced Persons and Migrants." A number of ministers to increase the grant only that the prime minister-said : "This permitted by the budget and the remaining amount we hope to obtain more to increase this amount

Translated version of http://www.aladalanews.com/

Electricity justify increasing the number of hours the pieces


Baghdad / justice Alija the Ministry of Electricity to increase hours Discount programmer for the city of Baghdad Karkh especially to the one super power transmission lines capacity to act of sabotage.

A source in the ministry in a press statement that after the slight improvement on the electrical system during the past few days was one of the lines of high voltage power transmission capacity to 400 in nutritious for the city of Baghdad from the northern region to the act of sabotage. " He added : "Such acts reflected negatively on the ability to secure the electricity supply to the city of Baghdad." It is noteworthy that most of Baghdad continues to suffer from the disruption in electricity up to twenty hours a day.

Translated version of http://www.aladalanews.com/