Abstract

This study aims to know the volatility and impact of exchange rates and trade balance on the Iraqi economy by affecting the volume of foreign trade as well as the flow of capital between the external and domestic economies and on foreign investment, so we note the importance of the exchange rate in influencing the domestic and external balance.Therefore, our study proceeds from the fact that there is a two-way correlation: the first is moving from the exchange rate to the Iraqi trade balance, and the second is moving from the trade balance to the exchange rate in the parallel market, and through this study shows that there is a relationship of complementarity between the exchange rate and the Iraqi trade balance.The study concluded with a series of conclusions and recommendations that were derived from the theoretical and quantitative aspects of research, which may help to enhance economic stability through exchange rate balance and trade balance. With regard to the conclusions، the most important conclusion is that there is a reciprocal relationship between the exchange rate and the trade balance, i.e. all the commercial and financial transactions contained in the balance of payments represent the demand for foreign currency and all commercial and financial transactions contained in the balance of payments represent the supply of foreign currencies, the devaluation of the local currency will raise the prices of imports, the demand for them will decrease domestically, and this action will reduce the prices of exports in foreign currencies and thus increase the demand for them externally, and thus improve the balance of the balance, thus improving the balance of demand commercial state.