The role of stock market indicators in mediating the impact of monetary policy on financial stability in Iraq

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Abstract

the article examines the role of stock market indicators such as the Iraqi Stock Exchange Index (ISX) and bond yields in mediating the impact of the Central Bank of Iraq’s (CBI) monetary policy instruments on financial stability between 2003 and 2023. Using a mixed research method, including vector autoregression (VAR), mediation analysis, and thematic analysis of secondary data from the CBI, IMF, ISX, and scientific sources, the weak mediating influence of the capital market is revealed due to its underdevelopment. The results demonstrate that monetary policy instruments effectively stabilize prices, but are poorly transmitted through the stock market to financial stability indicators such as the non-performing loans ratio and systemic risk. Recommendations are offered for the development of ISX to strengthen policy transfer. The study fills a gap in the literature on developing oil-dependent economies.

About the authors

B. B Hasan

Patrice Lumumba Peoples' Friendship University of Russia

Email: 1042235212@pfur.ru
ORCID iD: 0000-0002-5239-4537

A. V Girinsky

Patrice Lumumba Peoples' Friendship University of Russia

Email: girinskiy-av@pfur.ru

S. G Karim

Salahaddin University – Erbil (SUE), Iraq

Email: Safeen.kareem@su.edu.krd

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