The sequential effect of the efficiency of quantitative instruments of monetary policy on the effectiveness of the Iraqi banking system and its financial depth for the period 2006 - 2020
Keywords:Keywords: quantitative instrument of monetary policy, financial depth, monetary depth, banking system effectiveness, gross domestic product.
The study aims to analyze and evaluates the sequential impact of the efficiency of the quantitative instruments of monetary policy on the effectiveness of the banking system and its financial depth. To represent the main problem of this study, the question has been raised on how to implement monitory policy through the use of quantitative instruments to improve the effectiveness of the banking system; it also aims to identify how it affects on the financial depth of the banking sector? The study is essential to show the positive and negative impacts of quantitative tools of monetary policy on the effectiveness and financial depth of the banking sector. The topic has acquired exceptional importance as a result of the current and future development of the Iraqi banking sector and the mechanism of dealing with such development in the best possible way. In order to reach the nature of the impacts of the relationship and the correlation between variables of this study, relevant analyzing methods were employed to analyze data collected from the various reports of the Central Bank of Iraq.
The results of the study show that the Iraqi banking system is characterized by a lack of depth in terms of its indicators, where the monetary depth averaged 35.52%, while the private and public credit depth averaged 6.3% and 3.5%; Thus, it’s a small percentage comparing to other countries in the region. It was also found that the efficiency of the quantitative tools of monetary policy has a direct and indirect impact on the financial depth since the value of the direct transactions has a normative impact of (0.331), the value of the indirect transactions has a normative influence of (0.451); Thus, the result indicates the presence of the mediating variable (the effectiveness of the banking system). Consequently, the value of the relationship for the independent variable in the dependent variable will be improved.
This study concluded with important recommendations include supporting the private banking sector in Iraq to be capable of competing for public sector banks. It also recommends developing relevant financial instruments and services for the local and government financial operations through liberalizing interest rates and improving the quality of financial services provided to ensure efficient mobilization of financial resources and increasing the financial depth. The study recommends the implementation of quantitative instruments for monetary policy through the application of advanced modeling in the field of the volume prediction of liquidity, as well as introducing new instruments to determine bank liquidity through open market operations.
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